EDITORIAL USE ONLY Secretary of State for Environment, Food and Rural Affairs Elizabeth Truss with (left to right) Dan Jarvis MP for Barnsley Central and Gavin Darby, CEO Premier Foods, open the new £20m production line at the Mr Kipling bakery in Carlton, Barnsley, which will more than double the capacity of its Snack Pack cake slices.
Activist investor Oasis sought to remove Gavin Darby at the annual shareholder meeting last July

The former chief executive of Premier Foods, Gavin Darby, has been awarded a golden handshake worth at least £1.1m from the heavily indebted foodmaker.

The company that makes Mr Kipling cakes and Ambrosia puddings published the terms of Mr Darby’s departure on its website on Thursday.

They are likely to attract scrutiny given the size of the payout and the fact that the departure had been described by the chief executive as voluntary.

Mr Darby, who was chief executive for six years, became a flashpoint for controversy last July when activist investor Oasis sought to remove him at the annual shareholder meeting. He narrowly survived but his reputation was tarnished, and in November he announced he would step down effective January 31, 2019.

Under the terms of his contract, Mr Darby is entitled to a cash payment worth £863,557 in “in lieu of 12 months’ notice in respect of salary, contractual benefits and pension supplement”, said the company in the statement.

He will also receive 638,630 shares under a long-term incentive plan. At the opening share price of 36.70 pence on Wednesday, those shares would be worth roughly £234,000.

Premier Foods will pay a further £20,000 for “advisory services” to be provided to Mr Darby, which likely would cover helping him find a new job, and £10,000 for “legal fees incurred in connection with his departure”.

Lastly, Mr Darby is also eligible to receive some of his bonus for the 10 months of the 2018-19 financial year that he worked, although the amount was not disclosed.

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Gavin Darby is credited with bringing back sales growth when he was Premier Foods chief executive © Alamy

In November, Mr Darby told the Financial Times he was choosing to step down from Premier Foods because his tenure was at a natural end. “My decision to step down is linked to the business doing well and the progress we’ve made in reducing the debt and putting the company on sound footing,” he said at the time.

Paying a departing chief executive usually indicates the board chose to terminate the employment.

The company said: “The payment reflects the board’s legal obligation under the terms of Gavin’s contract.” Mr Darby could not immediately be reached for comment.

During Mr Darby’s tenure, Premier Foods made significant progress in reducing its high level of debt, largely by renegotiating its huge pension liabilities incurred via earlier dealmaking. He is also credited with bringing back sales growth to some stagnant categories, as well as embarking on an international expansion on the back of a licence from Mondelez International to make Cadbury cakes in 46 countries.

Mr Darby was earning similar to what the lower end of FTSE 100 chief executives are paid, according to data compiled by the Chartered Institute of Personnel and Development and the High Pay Centre.

According to Bloomberg, his total compensation was £1.75m in 2016, £862,000 in 2017 because he was not paid a bonus, and £1.23m in 2018.

Meanwhile, the company’s market capitalisation has shrunk to £318m, while the debt is about £521m, according to Capital IQ data.

Hong Kong-based Oasis owns an 11.9 per cent stake in Premier Foods, according to Bloomberg. In recent months, the New York-based hedge fund Paulson & Co has also built an 11.9 per cent stake.

This article has been updated to correct the stake owned by Paulson & Co.

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