Greencore takeover talks could restart

The firm announced yesterday that talks with the potential buyer had come to an end due to “the Board’s unanimous view on the strong underlying value of Greencore and the current dislocation in global equity and debt capital markets​”.

However, Julian Wild, food group director at law firm Rollits, told FoodManufacture.co.uk that the latest developments do not necessarily spell the end of a possible takeover deal.

He said: “There was talk of interest in Greencore earlier this year, prior to the latest talks. Whether that was the same suitor who has just pulled out is difficult to say.​

“Private equity firms have had a lot of exposure to Greencore through the Northern Foods deal. But these things are ultimately down to value, so much will depend on the firm’s share price. If it were to dip south then it is possible we would see some renewed interest​.”

Takeover talks​

Greencore, which supplies retailers Asda, Marks & Spencer, Tesco and Sainsbury, has been the subject of takeover talks since October.

The identity was suggested to be a private equity firm, with US company Clayton, Dubilier and Rice strongly touted as the mystery bidder.

However, Greencore ceo, Patrick Coveney told FoodManufacture.co.uk: “We are no longer in an offer period and can get on with delivering the strategy we have set out.​”

The firm yesterday reported turnover up 8.7% to £804M in the year to September, after confirming the end of the talks.

Greencore reported like-for-like sales up by 4.3%, boosted by the performance of its Convenience Foods division. Alan Williams, chief finance officer, told FoodManufacture.co.uk: “Convenience Foods performed well in a very challenging market leading to an operating profit level with financial year 2010.​”

Revenue growth​

The division showed reported revenue growth of 8% and growth in operating profit of 5.3% leading to an operating margin of 6.7% compared with 6.9% in the previous financial year.

Pre-tax profits dropped to £12M from £26M last year.

Although fresh sandwiches, soup and chilled ready meals performed well, cakes and desserts suffered from “excess industry capacity and a flat cakes market​”, leading to declining returns.

The yorkshire pudding business experienced what it described as “a challenging year​” as the firm upgraded the ovens at its Leeds manufacturing site following the devastating fire in March 2010.

While the UK business experienced input cost inflation of 4%, this was mitigated by internal efficiency programmes, product reconfiguration and price rises, said the firm.

Coveney said: “2011 has seen Greencore complete its transformation into a focused and growing convenience food business. The acquisitions that we made during the year in both the UK and the US [Massachuetts-based On a Roll Sales] should be taken as a clear indication of our long-term strategy of supplementing organic growth with strategic corporate activity​.”

The latest accounts include net exceptional costs of €13.6M. This reflects the costs associated with the failed merger with Northern Foods, ultimately bought by 2 Sisters owner Ranjit Singh Boparan, and the acquisition of chilled manufacturer Uniq in a £113M deal that involved raising £80M in equity.

Wild described Greencore’s performance as “very solid​” and said that the firm will now be concentrating on the successful integration of Uniq.

“But they need to be making progress beyond that and will be keeping an eye on where the next opportunity is coming from,​” he added.