Embattled Greencore's shares rise as Luxembourg firm snaps up €42m stake
Luxembourg-based investment firm Axxion has built more than a 3pc stake in Irish food group Greencore.
It's a much-needed vote of confidence for embattled Greencore as it fights to strengthen its position in the United States and faces uncertainty in the UK as Sainsbury's and Asda plan to merge.
It's believed Axxion has not been a previous major investor in Greencore and it has bought its holding at a time when the FTSE-250 company's shares have still not recovered from a 30pc slump in early March.
Greencore, whose CEO is Patrick Coveney, announced that month that it was shutting a plant in Rhode Island that had supplied customers including Starbucks.
It also detailed challenges it's facing with falling sales at its legacy portfolio, and how it's trying to improve sales at Peacock Foods, the Illinois-based firm that generates about €1bn in annual sales. Mr Coveney is now spending much more of his time in the United States in order to deal with issues there.
Axxion informed the stock exchange that it crossed a 3pc ownership threshold in Greencore on May 3.
The 3.2pc stake is currently worth about £37m (€42.3m).
Founded in 2001, Axxion manages more than 140 private label funds with more than €8.4bn in assets.
The acquisition of the shares by Axxion is also an important endorsement for Greencore, as its shares have been recently one of the top shorted stocks on the London Stock Exchange - along with department store chain Debenhams - as investors bet the shares will see further declines.
But Greencore shares jumped more than 3pc on Tuesday and had edged slightly higher by lunchtime yesterday.
The shares took a hit last week when Sainsbury's confirmed it's looking to merge with Asda in a tie-up that will radically alter the UK grocery market.
Greencore is the sole sandwich supplier to the two chains.
A merger between Sainsbury's and Walmart-controlled Asda would rank the combined entity as Greencore's second-largest customer, behind Marks & Spencer.
Sainsbury's chief executive Mike Coupe has already promised to leverage the strengths of an enlarged group to put pressure on suppliers to lower prices.
Asda currently accounts for close to 10pc of Greencore's profits, and Sainsbury's about 5pc.