Harry Ramsden’s owner goes big-game fishing for Northern Foods
A stock exchange announcement released today by his firm Boparan Holdings said: "Boparan confirms that it is at a preliminary stage in evaluating a possible cash offer for Northern Foods and has requested information under ... the Takeover Code. However, there can be no certainty at this stage as to whether this will result in an offer being made for Northern Foods."
Noting press speculation concerning a possible offer from Boparan – chief executive of 2 Sisters Food Group, owner of Harry Ramsden’s and Fishworks – Northern Foods said early this morning that it received a letter on December 17 from the businessman's firm requesting information in accordance with the City code.
Northern and Greencore puff tabled offer
“Boparan has not made an offer proposal to the board, nor has it indicated the price at which any offer may be made," said Northern's statement. "Shareholders should be aware that there is no certainty that an offer will be made, nor as to the terms upon which any such offer may be made.”
At this stage Boparan and his team have appointed banker NM Rothschild and asked for access to the confidential data that will enable them to complete due diligence, since takeover rules allow bidders fair access to financial information for the duration of any offer period.
However, Northern Foods said its board “continues to believe that the proposed merger with Greencore to form Essenta Foods … offers substantial benefits for shareholders, customers and employes, and will create a convenience foods business with a strong platform for further growth and the potential to realise significant cost savings through synergies".
This £500m all-share offer is the one that Northern’s board would “unanimously recommend” to shareholders at a January 31 meeting, the company said, while Greencore also released a statement advising shareholders from both firms to support the offer, which it said "represents a compelling opportunity for value creation for both Greencore and Northern Foods shareholders".
Could Boparan hook Northern?
So how likely is it that Boparan's interest could ruin the Essenta tie-up? Alex Sloane, equity analyst, Evolution Securities told FoodManufacture.co.uk that the potential rival bid was intriguing, and came as no surprise.
"So far we haven't had a bid, although the speculation is that it may be around £300m: roughly 64p/65p each for Northern Foods given that its share price has moved to around a 30% premium compared to Greencore's, despite the touted 'marriage of equals'.
"So I think the markets were pricing in the possibility of a successful counter-bid, although we have yet to see whether shareholders would prefer a cash offer or an all-share deal, but there are three principal reasons why the latter Greencore-Northern course is the more likely."
Firstly, Sloane said, both the Northern and Greencore boards favour the already tabled offer, while secondly, the firms are able to achieve "quite significant cost synergies [the figure claimed is £40m over three years] given the overlap in categories such as chilled ready meals, prepared meals and sandwiches".
Fewer overlaps
And although Boparan acquired a 6.6% stake in Northern only days after news of the potential Greencore merger emerged, and supplies one of the firm's major customers Tesco with poultry products from his 2 Sisters Food Group, Sloane said there was "potentially less overlap further down the line in terms of synergies, so this clearly favours Essenta".
Boparan’s company 2 Sisters Food Group supplies raw and prepared chicken products to the retail, food service and manufacturing sectors. It has 10 UK and 7 EU manufacturing sites and posted a 2009 turnover of £579m turnover, while Boparan has an estimated personal fortune of £130m.
