UPDATE: IRELAND: Northern deal can yield savings - Greencore
The Irish food group has seen UK poultry-to-fish supplier Boparan Holdings table a takeover bid for Northern and potentially scupper its plans to merge with the UK food manufacturer.
Boparan Holdings' GBP342m cash offer was accepted by Northern's board on Friday evening. Northern's directors, who have spent two months recommending that the company's investors support the plans to merge with Greencore, have now thrown their weight behind Boparan Holdings' bid.
The ball is firmly back in Greencore's court ahead of shareholder meetings at the company and at Northern next Monday to vote on the merger between the two groups.
Reports have suggested that Greencore is considering whether to submit an improved bid that, while not an all-cash offer, will contain a cash element. The Irish company has, however, refused to comment publicly.
Nevertheless, in a statement issued this afternoon, Greencore reiterated that its plan to merge with Northern would deliver "annual cost net synergies of GBP40m".
Greencore said the combined company would enjoy GBP15m in savings on overheads, some GBP20m on purchasing and improvements to supply chain and around GBP5m from "financing and tax efficiencies".
The company said the combined entity, to be called Essenta Foods, could also enjoy more savings from the restructuring programme under way at Northern. In October, a month before the proposal to merge with Greencore were announced, Northern announced plans to re-shape its business from five divisions to two.
Greencore added: "In addition, Greencore believes there is potential for further upside from additional operational synergies which have not yet been fully quantified."
The creation of Essenta Foods would also lead to "certain revenue synergies" through "leveraging distribution channels, brands, product portfolios and R&D capability across the combined group", Greencore argued.
Analysts are split over what could happen next. RBS analyst Robbie Aitken has argued that Greencore could "inject cash" into its proposed deal with Northern if it feels the synergy targets announced are "conservative".
However, Joe Gill, an analyst at stockbrokers Bloxham in Dublin, told just-food that Boparan Holdings' all-cash offer would be more appealing to Northern investors - even if Greencore returned with an improved bid.
A successful but higher offer from Greencore would lead to the combined company taking on higher debt, Gill said. He also argued that whether the combined Greencore and Northern could generate the GBP40m in synergies remained uncertain.
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