Business Irish

Thursday 22 February 2018

Coveney upbeat on Trump effect as Greencore US deal lifts shares

Donald Trump
Donald Trump
Donal O'Donovan

Donal O'Donovan

Greencore Group shares surged more than 12pc yesterday after the Irish company confirmed a deal to take over Peacock Foods, a US supplier to the likes of Kraft Heinz and Tyson Foods.

The $748m (€695m) deal will quadruple Greencore's US sales, and deliver annual cost synergies of $15m (€13.9m) by 2019, the company said.

Greencore chief executive Patrick Coveney said the deal was transformative for the business, and will result in a group roughly balanced between equal scale operations in the UK and US.

In the wake of the US presidential upset, with Donald Trump promising to rein in cross border-trade, Mr Coveney said that both Greencore's US and UK business are relatively well proofed against the growing protectionist climate.

In the case of Peacock Foods, he said he does not expect any political or trade shifts to impact the business.

"What's important is that we've got to figure out the underlying drivers of the food business. The view we took with the US, is that we'll manufacture in the States for the States," he said.

Greencore, following its earlier takeover of Unique in Britain, is already the world's largest sandwich maker, supplying customers including coffee giant Starbucks.

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Depending on a shareholder vote at an extraordinary general meeting scheduled for December 7, it will acquire Peacock Foods from private-equity firm Charlesbank Capital Partners and company in a deal valuing the business at $748m, including debt.

The deal will be funded with a two-to-one mix of new equity and debt. Shareholders will be asked to come up stump up £439m (€510m) in a rights offering, which all existing investors have a right to participate in, he said.

The rights issue has been underwritten by HSBC Bank, Goodbody Stockbrokers, Jefferies International Limited and Dutch lender Rabobank

"It's a transformational deal at an appealing valuation," Charles Pick, an analyst at Numis Securities said. "The sheer size of the US market is what's attractive. No one eats convenience food on the scale that Americans do."

The rights issue has been underwritten by HSBC Bank, Goodbody Stockbrokers, Jefferies International and Dutch lender Rabobank. Early indications are that shareholders are supportive of the offering, Mr Coveney said. "We are delighted the market has reacted as positively as it has," he said as the stock soared yesterday.

Peacock itself has virtually doubled revenue to almost $1bn (€.92bn) in the last three years, and its headquarters near Chicago is at the heart if the US food industry.

Despite sales largely in the UK and US, Mr Coveney said Dublin remains an appropriate headquarters for the group, with a good tax regime, access to talent and fast and easy access by air to its main markets. (Additional reporting Bloomberg)

Irish Independent

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