Greencore said it would buy UK-based convenience food firm Uniq, and warned its core UK convenience food market would remain challenging in the final quarter of the year.
In a statement this morning, Greencore outlined plans for the proposed deal, which is expected to deliver about £10 million a year in net cost synergies as it eliminates duplication of corporate, divisional and functional overheads.
The boards of both firms have reached agreement on terms of the cash offer which will see Uniq shareholders get 96 pence per Uniq share in cash, valuing the share capital at around £113 million.
The proposed offer is a premium of about 25.5 per cent to yesterday's closing price of 76.5 pence per share.
The acquisition will be funded through a new debt facility and a fully underwritten five for six rights issue at €0.46 per share, which will raise around €80.2 million.
Greencore said it expects the acquisition to help the combined group achieve greater scale in the food to go and chilled desserts markets, and will help build customer relationships for Greencore, particularly with Marks & Spencer, which Uniq supplies.
The group has already got the backing of major shareholders in Greencore and Uniq for the acquisition.
Greencore chief executive Patrick Coveney said the deal was a good fit for Greencore.
"The proposed acquisition of Uniq delivers demonstrable further scale in two key categories – food to go and chilled desserts, and is underpinned by substantial synergies," he said.
"Furthermore, it broadens Greencore's commercial footprint and it is perfectly aligned to our strategy. It represents an important milestone as we extend the scale and leadership positions of our Group in the UK convenience market."
Greencore previously attempted a deal with Northern Foods, but abandoned the attempt after a rival offer from businessman Ranjit Boparan was backed by the board instead. The failed deal cost the company €13 million in costs.
In an interim management statement this morning, Greencore said its convenience food division recorded a good third quarter, with sales growing by 9 per cent on a constant currency basis, following on from a strong first half. It attributed the growth to buoyant underlying demand during April and May as the good weather and public holidays impacted sales. It said the addition of new customers, particularly in prepared meals and food to go businesses also helped drive growth, along with the good sales growth in the US business, in the wake of the acquisition of the "On A Roll" business.
Greencore said input costs would continue to rise, with inflation expected to be around 4 per cent for the year. "The financial impact of this inflation will have been mitigated in FY2011 through internal efficiencies, product reconfiguration and selected price increases," it said.
Greencore said its trading environment in the core UK convenience foods market has been "challenging and volatile" during 2011.
"The board expects this to remain the case in the seasonally important final quarter of fiscal year 2011," the company said.
Depending on exchange rates, however, the board said it expected to delivering adjusted earnings per share in line with market expectations.
