Convenience food manufacturer Greencore has today agreed to buy rival Bakkavor in a deal valued at £1.2 billion, to create a convenience foods giant in Britain.
Greencore has offered to buy Bakkavor for 200 pence per share in a cash and stock deal, after being rebuffed twice, at a premium of nearly 6% to its last bid of 189 pence.
Bakkavor shares rose nearly 8% to 192 pence, while pre-packed sandwich maker Greencore fell nearly 3%.
Bakkavor’s retail customers include Tesco, M&S and Waitrose, while Greencore supplies all major UK supermarkets.
“We are encouraged that a route forward has been found in relatively short order, and are increasingly warming to the value of a Greencore/Bakkavor combination,” said Jefferies analysts in a note.
Under the terms of the deal, Bakkavor shareholders will receive 85 pence in cash and 0.604 Greencore shares per Bakkavor share.
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.
Shareholders of Bakkavor, which operates in Britain, China and the US, will also be entilted to a contingent value right if its US business is disposed before June 30, 2026.
The company has been reshaping its US business after cost-overruns and a subdued consumer market led to reduced volumes in the region.
The latest bid will be unanimously recommended by the companies and will see Bakkavor founders Agust Gudmundsson and Lydur Gudmundsson, joining the combined group’s board as non-executive directors.
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.
Bakkavor employs around 18,000 staff across 42 sites in the UK, US and China.
It makes around 3,500 different freshly prepared food products, including meals, salads, desserts, dips, sauces, sandwiches, and pizza and bread products.
