Convenience food manufacturer Greencore has agreed on a deal to acquire rival Bakkavor for £1.2bn after two previous offers were rejected a month ago.
Greencore’s offer of 200p per share represents a premium of 32.5% to Bakkavor’s closing stock price on 13 March, the day prior to when news of a potential tie-up went public.
Both companies are major suppliers to the supermarket multiples in the UK. Ireland-headquartered Greencore generated sales of £1.8bn last year, producing sandwiches and other convenience and food-to-go items. Bakkavor, which turned over £2.3bn in 2024, supplies soups, ready meals, sauces, salads, and pizza from its 20 factories across the UK.
Bakkavor has faced disruption in the past year, with a strike at its Spalding site leading to shortages of some of its lines. Meanwhile, Greencore has faced pressure from activist investor Oasis Management, its largest shareholder, to speed up its turnaround plan and improve shareholder returns.
Greencore noted that the acquisition would create a leading UK convenience food business with a combined revenue of about £4bn. Both companies’ boards have identified the potential for “substantial synergies” across manufacturing, distribution, purchasing and administrative functions.
“The combined group would have the potential to benefit from economies of scale in relation to investment in existing infrastructure and systems, sustainability programmes, and the key automation agenda,” Greencore’s statement said.
The cash and shares deal is subject to shareholder and regulatory approval. If it goes ahead, Greencore shareholders would own approximately 56% of the combined group, with Bakkavor shareholders owning 44%.
Following this morning’s announcement, unions raised concerns that the takeover could result in factory closures and job losses.
“This is a massive merger and could possibly pique the curiosity of the Competition and Market Authority’s new boss,” said Eamon O’Hearn, GMB National Officer.
“Whether it does or not, companies ‘assessing synergies’ is often management speak for cost cutting. It is widely acknowledged by government and the wider industry that the UK food and drink industry needs more capacity, not less. GMB is calling for a commitment to no factory closures and no job losses.”
NAM Implications:
- Some might regard a 50/50 split as a merger, 56/44 not…
- If this is about money, this latest offer will work.
- If it’s about power, the 56/44 may be a stumbling block.
- Watch this space…
