While analysts predict that mass factory closures are unlikely given that both firms have recently reduced their footprint in chilled meals and there is surprisingly little overlap in the rest of their operations, job losses were inevitable, a Unite spokeswoman told FoodManufacture.co.uk.
“Jennie [Formby – Unite’s food sector boss] has expressed her extreme concern that we weren’t alerted earlier about this. While there are clearly market sensitivities as these are listed companies, we are well aware of the rules about disclosure and often get a heads up about deals, especially when there is union representation across all the sites.
“We want to know what the £40m savings will mean for jobs."
A meeting was being urgently sought to ensure bosses made good on their promise of only modest redundancies but also "to make sure any job losses are voluntary", she added. "Unite will also be pressing for commitments to uphold all agreements on pay, pensions and conditions, as well as for investment in the merged company."
Deal is 'not about closing factories'
A Greencore spokesman declined to comment on the detail of where the proposed £15m in overhead cost savings would come from, but said the deal was “not about closing factories”.
He also stressed that both parties had taken advice about how and when to communicate details of the proposed merger to staff and to trade union representatives without breaching stock exchange rules, adding that HR controllers at Greencore were available for briefings with trade union contacts as soon as the market announcement had been made.
Much of the synergy savings would come from reducing corporate overheads and shared functions, while suppliers to the two will also be expected to deliver keener terms, said analysts.
Northern Foods has not commented on which functions will be handled where, but said it would retain a 'UK operational centre in Yorkshire', raising hopes that Northern Foods' head office in Leeds will remain part of the new organisation - albeit with a changed structure.
The firms also anticipate synergies through leveraging distribution channels, brands, product portfolios and research and development capabilities.
Counterbid?
Meanwhile, the fact that the boards of both firms have recommended the deal to shareholders would make a counterbid more problematic (their shares have also surged following Wednesday‘s announcement), said analysts, but it could not be ruled out.
Their comments came as one industry source speculated to FoodManufacture.co.uk that Kerry Group might consider an approach for Northern Foods.
Shore Capital analyst Clive Black said: “You never can say never when it comes to corporate situations. Both companies are arguably in play at present.
“But the issues for any new suitor are the Board recommendations, the upward price movement since the deal announcement, the synergies that few other combinations can achieve - something that may knock out financial buyers – and the agreement from the pension trustees.”
Supermarket exposure
As for the issue over whether the combined group – dubbed Essenta Foods –would lose some business as the supermarkets sought to reduce their exposure – Black said this was unlikely.
“I think the retailers will broadly give their blessing... there is not huge spare capacity in ready meals and sandwiches.”
Click here to read more about the deal.
Click here to read about the new appointments at Essenta Foods.