Greencore, the sandwiches and ready meals maker, said on Thursday it has signed up 69.4 per cent of shareholders in Bakkavor in support of its planned £1.2 billion (€1.4 billion) purchase of its UK rival.
The level of so-called irrevocable undertakings from Bakkavor shareholders comes after both sides confirmed they had agreed terms of a recommended £2-a-share, stock and cash offer from Greencore.
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 pretax cost synergies of at least £80 million by the end of the third year following completion, according to the statement.
The deal to create a leading convenience food business in the UK with a combined revenue of £4 billion and having approximately 30,500 employees will see existing Greencore investors own 56 per cent of the group, with Bakkavor investors holding the remainder.
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Separately, Dublin-based Greencore upgraded its full-year operating profit guidance to a range of £114 million to £117 million from £112 million-£115 million, bringing it to above pre-pandemic levels of profitability.
[ Greencore agrees deal to acquire rival BakkavorOpens in new window ]
Its operating profit for the six months to the end of March, its fiscal first half, jumped almost 60 per cent to £45.2 million, driven by disciplined cost management through and continued growth with customers. Revenue advanced 6.5 per cent to £922 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,” said chief executive Dalton Philips.
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“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.”
Greencore knows Bakkavor well. The latter had built up an 11 per cent stake in the Irish business before the 2008 financial crisis, stoking takeover speculation at Greencore – then also 29.9 per cent owned by boomtime developer Liam Carroll. At the time, speculation focused on whether Mr Carroll wanted Greencore’s defunct sugar plants in Carlow and Mallow for development.
Bakkavor, founded 40 years ago by Icelandic brothers Agust and Lydur Gudmundsson, sold its Greencore stake at a loss in October 2008 as the Gudmundssons saw their broader business empire come under pressure during the financial crisis. Bakkavor almost went under during the worst of that period. The Gudmundssons lost control of the business for a period, before managing to regain it a decade ago with the help of a US hedge fund.
The two convenience food groups share the same customers among major UK supermarkets – but have limited crossover in products. Bakkavor would add pizza, bread, desserts and dips to Greencore’s range, spanning sandwiches to salads, sushi and ready-made meals.
