The Japanese owner of Princes is determined to press ahead with a sale of the brand this year despite initial bids falling short of expectations as soaring inflation hit trading at the tinned food giant.

The Grocer revealed in January that Japanese conglomerate Mitsubishi Corporation, which has owned Princes since 1989, has hired investment bank Houlihan Lokey to explore a possible sale of the ambient food group.

It is understood indicative bids for the business did not meet Mitsubishi’s valuation, with City sources suggesting interested buyers were around £200m short of its £600m valuation in the early rounds of the process.

Bidder valuation is understood to reflect squeezed profitability at Princes, firstly post-Covid as surging pandemic demand eased and secondly following delays in passing on input inflation to retailers. These delays are thought to have been exacerbated by the large amount of own-label business in the group.

Mitsubishi is therefore reluctant to sell Princes on valuations based on its year to the end of March 2023 accounts and will return to the process later in the year once they can show price increases have worked through.

Current trading is believed to have improved since its financial year end and it is thought Mitsubishi is still planning for an exit by the end of 2023.

One City source also noted valuations had been hit by banks being less willing to lend big sums to private equity players to fund debt for a leveraged buyout.

It is understood a number of PE players have explored Princes, with Bain Capital-owned Valeo and US investment funds Loanstar, One Rock and TPG amongst the names mentioned.

“PE still has to do deals, needs to deploy funds, but it will low-ball the price given the environment,” one dealmaker commented.

It is understood that Princes has been marketed to global players as a platform to be used as a launchpad into the UK food space.

One City player commented: “Princes is a defensive asset in the current uncertain economic environment.

“People may have to hold off on big ticket items such as holidays or dining out in restaurants, but everyone needs to eat and if the economy takes a downturn then that will see groups such as Princes boost sales and volumes.”

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