Greencore sets price at £1.95 for its £509m tender offer
FOOD giant Greencore has offered to pay £1.95 per share in a £509m (€563.2m) tender offer that will buy up to 37pc of the company back from shareholders.
The tender price is a 17.5pc premium to the £1.66 closing price of the shares on Wednesday. But it's also lower than the £2.02 at which they were changing hands on the last trading date before Greencore originally announced plans to sell its US arm and return the cash to shareholders via a special dividend.
The food group, whose chief executive is Patrick Coveney, is returning capital to shareholders following the sale of the US business to Hearthside for $1.07bn (€933m) in October.
Greencore's original plan to use a special dividend to divide the cash amongst shareholders was criticised by many investors. Those who had stumped up cash to bankroll its purchase of US-based Peacock Foods in 2016 for $746m, would have wound up with a hefty tax bill to effectively get some of their own money back if a special dividend had proceeded.
Greencore's own biggest shareholder, Polaris Capital, had also opposed the special dividend, prompting the company to rethink the way in which it would split the spoils from the US divestment.
The company confirmed earlier this month that it would instead use the tender offer to return the capital.
However, Greencore added yesterday that if the full £509m is not returned via the tender offer, it will return the balance to shareholders after the completion of the offer, and probably via a special dividend.
Yesterday, Greencore released details of the tender offer, with shares in the group rising more than 7pc to £1.78 in early morning trading.
It said that the tender offer price is an 11.9pc premium to the volume-weighted average price per share over one month to December 19.
It confirmed that it will acquire a maximum of just over 261m shares, representing 37pc of the group's issued share capital.
The tender offer opened yesterday and runs to January 29. Cash will be paid to shareholders who participate in the offer, no later than February 7.
Completion of the tender offer will be conditional on shareholder approval at the group's Annual general meeting on January 29.
The sale of Greencore's US business left it focusing entirely on the UK and Ireland.
The group makes about 1.5 billion sandwiches and food-to-go items such as salads every year.
Greencore has contracts with a number of major supermarket chains such as Marks & Spencer, and with other customers in the UK. It imports about 20pc of the raw materials, including packaging, that it uses to make its products there.
Earlier this month, Greencore said it's ready to stockpile ingredients in the UK and change recipes if a hard Brexit hits supply lines.