Inside the world of business

Greencore given food for thought

IT SHOULD come as no surprise that Ranjit Singh Boparan has made a preparatory bid for Northern Foods. As reported earlier this month, the deep-pocketed Yorkshire chicken magnate has doubled his stake in Northern Foods since the announcement of the proposed merger with Greencore, while share price movements have indicated that a counter bid was possible. The big question is, how serious is he?

Opinions differed between analysts yesterday, with most believing that the possibility of a successful counter bid was unlikely. The fact that both Greencore and Northern Foods are recommending the bids, as well as the fact that the merger will save £40 million (€47 million) in “synergies”, are two reasons why the Greencore-Northern Food deal may be the more likely outcome. The question of how Boparan would deal with Northern Food’s multimillion-pound pension deficit, believed to form a key part of the merger deal with Greencore, is also an issue.

Nonetheless, the cash offer being offered by Boparan, rumoured to be in the region of £300 million, may be tempting to shareholders.

While any deal would be subject to British takeover rules, the relatively small-scale presence of Boparan’s operations in the food sector means a takeover should not pose a major problem.

One other issue to note yesterday was timing. While Northern Foods’ and Greencore’s decision to announce the details of the merger and the timetable for the vote yesterday could be seen as a slightly desperate attempt to stake their territory, the fact that Mr Boparan left it so late in the day to make a formal indication of his interest, may cast doubts on his seriousness.

Whatever the logic of the Greencore-Northern Foods merger, the market was unambiguous in its view of the possible counter bid, with Northern Foods’ shares soaring, while Greencore’s slumped.

What is undoubtedly clear is that the final decision will fall to Northern Foods. The implications for Greencore are huge if the merger fails. After admitting to the world that it needs a partner, Greencore may find itself jilted at the altar – not a pretty prospect for the company whose share price has failed to impress in recent times.

Any bets new casino will be a stalking horse?

THE FRAMEWORK for new legislation regulating gambling, published yesterday by Minister for Justice Dermot Ahern, was a long time coming and still leaves a few questions hanging in the air. It takes a realistic view of the proposals to license and regulate overseas online operators; ie, that doing so will be difficult, but provides no definitive solution to the problem.

Interestingly, the document strays into one area the revised British regime introduced by the last Blair administration feared to tread, super or “resort” casinos, which are essentially the type found in Las Vegas.

Ahern’s proposals suggest just one such resort casino could be allowed. The State would not directly support it, but could provide some backing for other tourist- and leisure-related facilities associated with it. There is one such proposal as it stands: a supercasino, race course, tourism and leisure complex for Two Mile Borris in Co Tipperary. Michael Lowry, whose constituency is home to Two Mile Borris, lent his support. Just before the Budget, he called for the proposed new gambling regulations to be published without further delay.

The project, promoted by businessman Richard Quirke, seems ambitious for the location, to say the least. Given that Quirke is based in Dublin, it could be that the project is a stalking horse for development in or near the capital.

Sale of State assets must benefit everyone

THERE WAS early Christmas cheer for current and former Aer Lingus workers this week with the news that the airline would wipe out the Employee Share Ownership Trust’s (Esot) €25.3 million debt.

This related to the purchase of shares by Esot at the time of the airline’s initial public offering (IPO) in 2006. Originally, the purchase of these shares was to have been funded by a new profit-sharing arrangement that could have run until 2023.

So, the more profit Aer Lingus made, the earlier the borrowings would be repaid and the sooner Esot members would get their individual share certificates that they could cash in if they so wished. But the Esot also had a fall-back position: if there was no profit to share, Aer Lingus would still pick up the tab.

According to Aer Lingus, some Esot members received shares worth up to €20,000. And before anyone suggests Aer Lingus is paying for this out of its own pocket, it’s not. The bulk of the €952 million in gross cash on its balance sheet dates back to funds raised at the time of the IPO. All of this is important in the context of the proposed sale of State assets. Bord Gáis, for example, could soon be on the blocks. Will the workers want a slice of the action in return for going quietly into the private sector? Probably. They already hold a 3.27 per cent stake in the energy company.

With the State’s coffers bare, and the country up to its neck in debt, the new government should ensure every cent from the sale of a State asset is used for the benefit of all taxpayers.

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