Pressure on Greencore to up stakes in Northern bid

Sources close to this publication suggest that media reports today, claiming that the Irish convenience food producer had teamed-up with New York private equity firm Och Ziff Capital in a joint bid for Northern, are wide of the mark.

However, talk still persists that Greencore is seeking private equity or trade support in a last-ditch attempt to trump Ranjit Boparan’s 73p/share all-cash bid for Northern, which the latter’s board recommends to shareholders, who have until 1pm on March 2 to accept or reject Boparan's offer.

One source suggested that Greencore’s previous emphasis upon £20m in cost synergies (as a result of tying-up with Northern on the basis of its initial £236m all-share deal last November) risked being wiped-out if it had to stump-up a substantial cash element to trump Boparan’s £342m offer, which the 2 Sisters Food Group owner made via a subsidiary company BH Acquisitions.

Moreover, rumours abound that Northern’s pension trustees are opposed to any break-up the company (which would see any Greencore partner take over the branded parts of the business leaving Northern’s own-label operations to the Irish firm), which is likely if Greencore ties-up with any private equity or trade player.

Clock ticking for counter-bid…​

Asked about these possible problems, Darren Shirley, analyst, Shore Capital, told FoodManufacture.co.uk: “Without knowing the details of any possible counter-offer, it’s hard to know how any potential deal could work.​

“But we said at the start that we wouldn’t rule out a counter-bid, involving either a private equity firm or another large industry player.​

“There’s certainly merit in the tie-up in own label between Greencore and Northern, and any spin-off of the latter’s branded business (Goodfella’s and Fox’s Biscuits) ​[in the event of a trade/private equity tie-up] wouldn’t necessarily be a problem.” ​

Boparan's potential blocking vote​

However, Shirley said that Boparan might have the power to stop any rival bid in its tracks: “Boparan now has over 10% ​[11.4% of Northern's shares] which is potentially a blocking stake. The deadline for any rival bid of March 2 is also fast approaching, so the pressure is on Greencore to get something out in the next week. I wouldn’t rule that out though.”​

Northern Foods' shares have been trading at around 74-75p (74.12p as we went to press) since Boparan tabled his 73p/share offer, which suggests that the markets are still pricing-in a possible counter-bid.

However, City analysts we contacted last week​ said that, given the short timeframe available to finance a second bid for Northern with a third party, Greencore might do better to set its sights slightly lower, and aim for acquisitions such as Premier Foods’ own-label businesses Brookes/Avana.