Bakkavör opens plant and starts restructuring talks

The new factory, which will create 120 jobs, will make nut-based products exclusively for Marks & Spencer. Its location, 450m from the main factory, will ensure total nut segregation between the two production units, said the firm.

The new jobs will bring the total number of employees at the site to more than 1,100.

Gordon Pates, ceo Bakkavör UK and Europe, said: “The facility provides an excellent platform for growth and demonstrates our commitment to the West Lothian area.”​

Bank debts​

The announcement on Friday April 27 follows news that the firm is negotiating with its lenders for an early conversion of its convertible loan agreement into equity and to reorganise its corporate structure.

The Iceland quoted firm has a syndicated bank facility of £380M.

Clive Black and Darren Shirley, city analysts with Shore Capital, described the firm as being the “… distinctly poorly child of the UK prepared food processing industry for some years”.​

Although progress had been made towards placing the business on a firmer footing, it still carried very high levels of indebtedness, they said.

Shirley told FoodManufacture.co.uk that the firm’s debt – amounting to 4.5 to 5.5 x earnings before interest, taxes, depreciation and amortisation – was “still in the stratosphere."​

Take-over target?​

Asked whether the firm could be a takeover target, Shirley told FoodManufacture.co.uk: “It was not unreasonable to assert that Bakkavör might feature in industry re-organisation or consolidation.”​

The firm is in a similar position to Northern Foods a year ago, he added. Northern was acquired by 2 Sisters.

Julian Wild, food group director with Rollits, told FoodManufacture.co.uk that Bakkavör’s major difficulties came at the high point of the Icelandic crisis several years ago.

Since then, the firm had made progress in rescheduling its debt and restructuring its business. It had closed a lot of factories, which had “eased its situation",​ he said.​

Acquisitions​

But its continuing high debt meant the firm was not in a position to make acquisitions and was unlikely to be a take-over target itself, said Wild.

That was because the business was entirely own-label, focused on supplying major retailers and had a high debt burden – which could become even heavier if interest rates rise.

Asked whether Bakkavör’s major competitor Greencore might be interested in acquiring the firm, Wild said that it was too big for Greencore to sensibly consider.

Also, major retailers would not be too thrilled to see Greencore acquire the firm because of competition issues, he added.

Bakkavör operates more than 20 business units in the UK including: Bourne, English Village Salads and Katsouris Foods,

A spokesman for Bakkavör said: “​We never comment on market speculation.”