“If I had to put money on it, I would say it was a private equity company,” Julian Wild, corporate finance partner and food group director at law firm Rollits, told Food Manufacture.co.uk.
Doughty Hanson & Co could be a likely candidate, he said. “I’m pretty certain they have looked at Greencore before and they previously owned RHM, so they have had previous experience of owning a large food business and selling it on.”
Wild suggested Greencore had known it was susceptible to takeover for some time and had tried to take over Northern Foods, and then opted for Uniq, partly to make it less vulnerable.
UK or overseas food businesses were unlikely to be interested in acquiring Greencore because, as a own-label business, it yielded low margins and would not fit a branded strategy. By contrast, overseas private equity investors would view many UK food manufacturers as reasonably priced in the current market, he added.
Susceptible to takeover
Clive Black, analyst at Shore Capital, agreed. He told Food Manufacture.co.uk: “We cannot rule out that management may be involved in any change of ownership of the business (ie. a management buy-out) in tandem perhaps with private equity".
As an exception he cited Kerry Foods as a food processor with the common ground and clout to pull off a Greencore takeover “for which there has been periodic speculation about interest in Greencore for some time”.
Damian McNeela, analyst at Panmure Gordon, also thought a private equity group was the most likely candidate. “It’s difficult to see any local food player gearing up to take Greencore out. That would lead to a private equity or possibly management offer. Greencore has a US presence, so it could be US private equity.”
The total offer for the company could reach about £435M and the approach could flush out other interested parties, said McNeela.
Turbulent future
In the light of recent developments, the latest of which was the Greencore approach, the industry faced a turbulent future, said Wild.
Companies with the most potential were prone to being bought by overseas finance houses and without overseas investment many remaining businesses, particularly in the own-label sector, were too frail to survive for long, he added.
This was because the big supermarkets had driven their profit margins down to unsustainable levels and showed little sustained loyalty to contracts, discouraging investment in plant that might later have to be mothballed.
In a statement released yesterday, Greencore said: “The board of Greencore Group notes the movement in the company’s share price and confirms that it has received an approach which may or may not lead to an offer for the company.
“The board would like to emphasise that the discussions are at a preliminary stage and there can be no certainty whether any offer will be forthcoming. A further announcement will be made when appropriate.”