Business Irish

Wednesday 19 September 2018

Share slump may make Greencore takeover target

Investors fear more bad news from the US after stock collapse

Several market sources confirmed that investors believe that the credibility of Coveney (p) has been damaged by last week's announcement
Several market sources confirmed that investors believe that the credibility of Coveney (p) has been damaged by last week's announcement
Samantha McCaughren

Samantha McCaughren

Irish convenience food company Greencore is now a takeover target following a collapse in its share price sparked by a profit warning, according to a number of market commentators.

Several UK-based brokers said that the company may now attract the attention of a buyer after the shares fell by as much as 30pc last week.

There are also fears that there are wider problems in the US business and pressure will continue to mount on chief executive Patrick Coveney.

While Greencore has said that the issues with its US business relate to legacy assets rather than Peacock, which it bought for $757m in late 2016, confidence in the company's abilities there have been shaken.

Several market sources confirmed that investors believe that the credibility of Coveney has been damaged by last week's announcement.

"There are fears that the whole US business is challenged and that the drip, drip of downgrades/issues is going to continue indefinitely," said Berenberg's Fintan Ryan.

"Investor patience is clearly waning. Valuation could make it a takeover target."

Clive Black of Shore Capital said: "The recent restructuring in the USA capped a sustained period of poor news flow Stateside - and for the CEO, Patrick Coveney, to have to go over suggests much is far from fine.

"And so Greencore, the basket case of Irish Sugar... evolved into a darling of the UK prepared food industry to only mutate into a seemingly different kind of basket case from a shareholder's perspective, losing an enormous proportion of its value over the last year or so."

He added that "management needs to get a grip otherwise it may become a value trap and/or fodder for others".

Fears about Greencore's US business first emerged last August and the company issued a statement to allay investor nerves when the share price fell without any apparent cause.

"The group is not aware of any developments since the release of its third-quarter trading statement on July 27 that changes the outlook contained in that statement," the company said in this statement last August.

Last week, it said in an unexpected update that it "noted continued low capacity utilisation at some of the original Greencore US sites. The Group is now restructuring its US network to reflect the commercial pipeline and to address these utilisation challenges".

As part of the restructuring, Coveney is to take a direct role in the "strategic, organisational and commercial leadership" of Greencore US. Chuck Metzger, COO of Greencore US, has assumed day-to-day responsibility for the US business and will report to Coveney.

As part of the restructuring, fresh production at its Rhode Island facility will cease this month.

See page 5

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