Convenience food manufacturer Greencore said today it had agreed to the terms of a recommended acquisition of UK fresh food provider Bakkavor Group, in a deal valued at £1.2 billion.
In April, the two companies said they had reached an agreement in principle on the key financial terms of a possible cash and share offer by Greencore for Bakkavor.
The offer base consideration comprises 0.604 new Greencore shares and 85 pence in cash, valuing each Bakkavor share at 200 pence, with potential for further value if there is a sale of Bakkavor’s US business, Greencore said today.
Bakkavor makes around 3,500 different freshly prepared food products, including meals, salads, desserts, dips, sauces, sandwiches and pizza and bread products. It has been reshaping its businesses across the UK, China and the US to cope with steep costs, subdued consumer demand and reduced volumes.
Bakkavor’s retail customers include Tesco, Marks & Spencer and Waitrose, while Greencore supplies all major UK supermarkets.
Greencore has received binding commitments from certain Bakkavor shareholders, who have committed to sell about 69.4% of all Bakkavor shares, it said.
On completion of the deal, Greencore shareholders are expected to hold about 56% and Bakkavor shareholders will own around 44% of the combined entity.
Greencore also today said that its half year profit before tax surged by 81.6% to £26.7m from £14.7m the same time last year on the back of what it called “disciplined cost management through operational and commercial excellence initiatives and continued growth with customers”.
Its half year revenues rose 6.5% to £922m from £866.1m.
The company said it continued to focus on product innovation, with 270 new products launched during the first half of its financial year.
It also noted new business wins across the food-to-go and ambient grocery sectors, which are expected to be onboarded in the third and fourth quarters.
Dalton Philips, Greencore’s chief executive, said the company again made excellent progress in the first half of the financial year, consistently delivering fresh, high quality convenience food to its customers and their shoppers.
“By continuing to strengthen our core business, we’ve accelerated our financial performance – enhancing returns, improving margins and driving growth ahead of the market. We have built strong momentum and remain committed to continued delivery,” he said.
“Our strong first half performance was enabled by continued growth with customers, innovative new products and disciplined cost management, including through operational excellence and automation,” the CEO said.
“While we are mindful of a challenging market environment, and with our seasonally stronger second half still ahead of us, we now expect Adjusted Operating Profit for FY25 to be ahead of previous guidance, in the range of £114-117m,” he added.
Strong demand for pre-packaged convenience food have boosted Greencore’s growth in recent years, however increased payroll and employment costs have proven to be an overhang for the Ireland-based company.
Greencore has its headquarters in Dublin, with a UK head office in Worksop and 14 factories across the UK.
The group supplies nearly 750 million food-to-go items each year and employs about 13,300 staff.
On today’s deal with Bakkavor, CEO Dalton Philips said the combination of the two companies marked an unrivalled opportunity to create a true UK national food champion with an even greater breadth of category range and deeper customer relationships.
“We are bringing together two experienced teams and our complementary portfolios will drive benefits for customers and consumers across the UK,” he said.
“The combined group will be able to invest more in innovation and product development ensuring we can provide the consumer with greater food choices at more points in the day, bringing together Greencore’s “food for now” expertise with Bakkavor’s “food for later” portfolio,” the Greencore CEO stated.
“Bakkavor is the ideal partner for Greencore and we look forward to delivering on the significant growth potential of the enlarged business,” he added.
Mike Edwards, the chief executive of Bakkavor, said that combining with Greencore would bring together two businesses with the best people in the industry allowing us to take a “best of both approach” to drive performance on every level.
“The combined business will create more opportunities for colleagues, allow us to do an even better job for customers, and be even more resilient,” he said.
“I am confident that the relentless focus that both businesses have on quality, service and innovation, and on striving to be a great place to work, will remain at the heart of the bigger business,” he added.
