Convenience good giant Greencore has reached an agreement with its rival Bakkavor about the terms of a £1.2 billion takeover.
The deal would create a company supplying the major supermarkets with sandwiches, salads, pizzas and ready meals with a combined turnover of £4 billion.
Greencore has already been rebuffed twice by its target but today said “the board of Bakkavor has indicated to Greencore that the key financial terms represent a value that it would be minded unanimously to recommend to Bakkavor shareholders” if a formal offer is made.
The offer comes the day after Greencore upped its profit guidance and said it saw “strong revenue and volume momentum” in its second quarter to 28 March.
The company has benefitted from stronger “on the go” convenience food sales as workers have returned to office after the pandemic. The return of the commute has also boosted ready meal sales as daily travelling to work eats into spare time.
Bakkavor was founded in Iceland in 1986 but is now one of the biggest players in the industry in the UK, and also has factories in the USA and China.
In 2005 it bought the fresh food supplier Geest once best known as a leading banana importer, for £485 million.
The £2.3 billion a year business employees 17,200 people around the world with 20 manufacturing sites in the UK and a headquarters in Fitzrovia, central London.
Ireland headquartered Greencore said it would offer 85p in cash and 0.604 Greencore shares for each Bakkavor share valuing the target at £1.2 billion. Bakkavor shareholders would also be entitled to a 4.8p final dividend.
The offer represents a 32.5% premium to the closing price on 13 March when the initial possible offer became public.
Greencore shareholders would own around 56% and Bakkavor shareholders 44% of the combined group.
Agust Gudmundsson and Lydur Gudmundsson, currently non-executive directors of Bakkavor, would join the board of the combined group as non-executive directors.
Greencore said the combined group “would create a leading UK convenience food business with a combined revenue of c. £4 billion, with a diverse product offering, strong commercial relationships, managed by a broader set of customer dedicated teams, and highly competitive capabilities in attractive segments across the UK convenience food landscape, creating significant benefits for customers and consumers as well as a stronger contribution to the overall UK economy.”
