RANJIT Boparan's bid of 73p a share for Northern Foods far exceeds the level expected by most analysts and may be difficult for Greencore to beat.
Last November the Irish company announced it had reached a deal with Northern Foods, maker of Goodfellas pizza among other brands, to merge into a new company, Essenta.
At the time Greencore and Northern said the new company would achieve savings of some £40m (€47m) for shareholders and create a "platform for growth" for both companies, something analysts agreed with. Those plans are now in turmoil after Mr Boparan's offer.
What move Greencore's chief executive Patrick Coveney makes now will be closely watched by the market. Greencore could try to top Mr Boparan's offer or add a cash element to their all paper bid, which is worth around 49p a share, but that cash will have to come from somewhere, and would likely add debt or reduce the synergies previously advertised.
If Greencore does lose out on Northern, then it will be wide open to a takeover, possibly at a knockdown price. Yesterday the stock fell 5.2pc to close at €1.20. The firm closed at €1.04 the day before the Essenta deal was announced.
"By coming out with the deal for Essenta initially, Greencore said it was looking for a strategic partner. That imperative remains," said Bloxham Stockbroker's Joe Gill.
Rising input prices that could be absorbed in a bigger company are also likely to cause a headache for the firm.
On Thursday, Associated British Foods said it may have to increase prices, citing rising commodity costs. As a sandwich maker, Greencore is especially vulnerable to wheat prices which are close to record levels.