15th May 2025 10:13
(Alliance News) - Greencore Group PLC on Thursday agreed a GBP1.2 billion takeover of Bakkavor Group PLC, creating a "leading UK convenience food business", just over a month after the duo struck a preliminary agreement.
Dublin-based convenience foods maker Greencore will pay 85 pence per share in Bakkavor as part of the consideration. The consideration also includes 0.604 of a new Greencore share per Bakkavor share. Greencore shareholders will own 56% of the combined firm, and shareholders in London-based provider of fresh food Bakkavor will own 44%.
Based on Greencore's undisturbed closing price of 190p on March 13, the deal values each Bakkavor share at 200p, and its entire issued and to be issued share capital at roughly GBP1.2 billion.
Greencore shares were up 1.2% at 191.34 pence each in London on Thursday morning. It has a market capitalisation of GBP845.0 million. Bakkavor rose 1.6% to 190.40p, giving it a market value of GBP1.10 billion.
Bakkavor shareholders may also be entitled to receive a contingent value right linked to the potential sale of the firm's US business.
The deal creates a "leading UK convenience food business" with a combined revenue of GBP4 billion and around 30,500 employees.
"The Greencore directors, having reviewed and analysed the potential synergies of the transaction, and taking into account the factors they can influence, believe that the combined group can deliver annual run-rate pre-tax cost synergies of at least GBP80 million by the end of the third year following completion," Greencore said.
Greencore has so far received the backing of just over 69% of Bakkavor shareholders.
Greencore Chair Leslie Van de Walle said: "We have long admired Bakkavor and we are pleased to announce a transaction that will create a true UK leader in convenience food. We intend to bring together our strong and complementary companies to deliver high-quality, innovative food to UK customers and consumers."
In April, the duo reached an "agreement in principle". Prior to that, Greencore in March confirmed it had made two takeover approaches to Bakkavor.
The first proposal was made on February 25, then rejected by the Bakkavor board on February 27. The second proposal was for 85p in cash and 0.523 of a Greencore share. Inclusive of a final dividend, it implied a 189p valuation per Bakkavor share, GBP1.14 billion overall.
Bakkavor Chair Simon Burke said: "We are very happy with the progress made by Bakkavor delivering its strategy and significantly improved returns, both in the UK and abroad. We have clear plans for continued growth and are confident in the prospects for Bakkavor over the coming years.
"However, there has always been a clear strategic, commercial and financial rationale for a combination with Greencore. Having considered a combination previously, we believe that this transaction now proposes terms that we consider are very attractive to Bakkavor's shareholders."
The deal is expected to come into effect "early 2026". It will be classed a reverse takeover according to UK listing rules.
Greencore, meanwhile, also lifted its annual profit outlook, following "excellent progress in the first half".
It said pretax profit in the half-year March 28 improved 82% to GBP26.7 million from GBP14.7 million. Revenue advanced 6.5% to GBP922.0 million from GBP866.1 million.
Adjusted operating profit increased 60% to GBP45.2 million from GBP28.3 million.
"The Greencore team again made excellent progress in the first half of the financial year, consistently delivering fresh, high quality convenience food to our customers and their shoppers. By continuing to strengthen our core business, we've accelerated our financial performance - enhancing returns, improving margins and driving growth ahead of the market. We have built strong momentum and remain committed to continued delivery," Chief Executive Officer Dalton Philips said.
The company now expects adjusted operating profit in the range of GBP114 million to GBP117 million for the first half, taking it "above pre-pandemic levels of profitability". Greencore's guidance was raised from the GBP112 million to GBP115 million range. Adjusted operating profit in financial 2025 totalled GBP97.5 million.
The second half is its "seasonally-stronger" period.
Bakkavor reported a "strong" first-quarter. Revenue rose 3.3% on-year to GBP559.3 million in the 13 weeks to March 29.
CEO Mike Edwards said: "The group delivered a strong performance in Q1 25, with excellent progress against the strategy across all three regions. The momentum this has created underpins our confidence in delivering both our increased guidance for FY25, and our ambition of achieving 6% margin in FY27."
It upped its full year adjusted operating profit to a new range of GBP120 million to GBP126 million.
In March, it had expected an outcome in line with consensus at the time of GBP118.6 million. Adjusted operating profit in the year that ended December 28 totalled GBP113.6 million.
By Eric Cunha, Alliance News news editor
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