Business Irish

Sunday 25 June 2017

Greencore merger with Northern Foods hit by rival bidder

Boparan considers hostile takeover that could derail €580m deal

Peter Flanagan

Peter Flanagan

GREENCORE'S proposed merger with Northern Foods was under threat last night after another company appeared set to launch a hostile takeover bid for the UK firm.

Boparan Holdings, a company controlled by businessman Ranjit Boparan in the UK, said it was "at a preliminary stage in evaluating a possible cash offer for Northern Foods and has requested information from Northern" under the British takeover code.

Last month Greencore and Northern announced they had agreed a merger of equals in an all-stock deal worth around €580m to create Essenta Foods.

That deal is due to close in the New Year but those plans were thrown into doubt yesterday by the emergence of Mr Boparan.

The 44-year-old's company, 2 Sisters, is one of Tesco's biggest chicken suppliers. The firm, which employs around 7,000 staff in the UK, Holland and Poland, reported annual sales of £739m (€868m) and earnings of £46m in its most recent accounts.

Under takeover rules, Northern must provide equal access to "bona fide" bidders in order for them to complete due diligence.

In a statement to the London Stock Exchange, Northern Foods said Boparan had not [yet] made a formal offer, and the board was backing Greencore's bid. It has been speculated the offer could be "cash rich" and in the region of £300m.

"Shareholders should be aware that there is no certainty that an offer will be made, nor as to the terms upon which any such offer may be made," the company said.

"The board of Northern continues unanimously to recommend shareholders to vote in favour of the proposed merger [with Greencore]," it added.

For their part, Greencore's board said they believed their offer "represents a compelling opportunity for value creation for both Greencore and Northern Foods shareholders, through the creation of a business with real scale in the industry and substantial synergies".

Circulars have been sent to shareholders from both companies before a January 31 vote.

Greencore's share price fell nearly 7pc on the emergence of a rival bidder.

Merrion Capital analyst Aoife Wyer said: "The bid poses a serious threat to the proposed merger between Greencore and Northern Foods. Mr Boparan has secured two significant deals since 2009 and could be a legitimate fit for Northern.



Attractive

"If Mr Boparan does make an attractive cash offer, as speculated, this may leave Northern Food shareholders with the option to chose between accepting cash or to wait for the promised benefits of the Essenta deal to materialise in its share price -- specifically the estimated £40m in cost synergies during the first three years of merger.

"Although NF shareholders have seen improvement in its share price since the merger, it is possible that the longer-term disappointment in returns might induce them to favour a cash offer.

"Mr Boparan will face some challenges however, specifically Northern's pensions deficit of £140m. In the case that Northern is sold to Mr Boparan, it is possible that Greencore would need to pursue another strategic partner going forward," she said.

Merrion carry a 'hold' rating on Greencore.

Irish Independent

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