Greencore has moved a step closer to sealing the takeover of fellow convenience food business Bakkavor as both boards have now put their recommendations behind the transaction.
In an update on proceedings today (15 May), Dublin-headquartered Greencore said it has “received irrevocable undertakings” from Bakkavor shareholders holding 69.4% of the shares in the UK-based business to accept the offer.
Go deeper with GlobalData
Shareholders of Greencore, which first proposed a deal for Bakkavor early in March, will now have to vote on approving the deal on or around 4 July, according to a stock exchange filing.
In the meantime, Greencore’s directors have already given the green light to the transaction, which has been valued at around £1.2bn ($1.6bn) to create a combined private-label business with revenue of circa £4bn.
However, Greencore has indicated a reduction in headcount post the transaction and also consolidation of manufacturing facilities.
Greencore has around 13,300 employees and Bakkavor about 17,200. “Based on Greencore’s preliminary evaluation, the synergy work undertaken to date suggests a potential headcount reduction of no more than 5% of the total combined group,” according to the filing.
US Tariffs are shifting - will you react or anticipate?
Don’t let policy changes catch you off guard. Stay proactive with real-time data and expert analysis.
By GlobalDataGreencore CEO Dalton Philips said: “The combination of Greencore and Bakkavor is an unrivalled opportunity to create a true UK national food champion with an even greater breadth of category range and deeper customer relationships.
“We look forward to welcoming Bakkavor’s employees and creating an exciting, combined business for all stakeholders. Bakkavor is the ideal partner for Greencore and we look forward to delivering on the significant growth potential of the enlarged business.”
Conversely, Bakkavor shareholders are expected to meet on or around 7 July to vote on accepting the deal.
Greencore suggested the takeover is likely to be cemented “early” in 2026, but it will still need approval from the UK’s Competition and Markets Authority.
If cleared, Bakkavor shareholders will receive 0.604 new Greencore shares at 85 pence each, along with one so-called contingent value right.
The contingent proportion relates to the proposed sale of Bakkavor’s US operations, Greencore said today as the ready meals to sandwiches supplier simultaneously raised its outlook for adjusted operating profit for fiscal 2025.
“Bakkavor may, prior to the effective [transaction] date, sell the US business if it determines that such a sale is in the best interests of Bakkavor, having regard to the best interests of its US customers, employees and other stakeholders, which are highly valued by Bakkavor,” Greencore said today.
If the sale of the US business has not been agreed by the takeover date, Greencore will still proceed to offload the business.
Mike Edwards, the CEO of Bakkavor, added: “Combining with Greencore would bring together two businesses with the best people in the industry allowing us to take a ‘best-of-both approach’ to drive performance on every level.
“The combined business will create more opportunities for colleagues, allow us to do an even better job for customers, and be even more resilient.”
Bakkavor had already announced in April the planned sale of its China operations to local firm Lihe Xing (Qingdao) Food Technology Co. for around £50m.
That business generated £26.4m in revenue for Bakkavor in the first quarter to 29 March, while the US operation contributed £59.2m, the company said in a trading update today.
Bakkavor’s group revenue grew 3.9% on a like-for-like basis to £556.6m. The UK segment saw sales rise 2.7% to £471m.
Meanwhile, Greencore said in its own trading update that first-half revenue to 28 March increased 6.5% to £922m.
Adjusted operating profit climbed 59.7% to £45.2m. Greencore updated its full-year outlook for that metric to a range of $114-117m, “bringing the group to above pre‐pandemic levels of profitability”.
In April, Greencore had forecast adjusted operating profit to be “ahead” of market expectations of £112-115m.
Elsewhere, Greencore’s adjusted EBITDA rose 30.8% to £73.1m. Adjusted profit before tax more than doubled to £34.8m from £16.9m.
Greencore’s shares were down 1% as of 11:35am BST in London today at 187 pence. Bakkavor’s shares were relatively flat at 187.20p.
The directors of Greencore have suggested the combination with Bakkavor will create “annual run-rate pretax cost synergies of at least £80m by the end of the third year following completion” of the deal, according to today’s filing.
Greencore added that the Bakkavor board sees the transaction as a “highly compelling proposition”, implying an enterprise value of £1.5bn, a multiple of 7.9 times its adjusted EBITDA for the year to 28 December.
Simon Burke, the Chair of Bakkavor, said: “Having considered a combination previously, we believe that this transaction now proposes terms that we consider are very attractive to Bakkavor’s shareholders.
“The transaction offers shareholders a significant premium, with an attractive combination of cash on completion and the ability to participate in the future value creation anticipated from bringing the two businesses together. For this reason, our board is unanimously recommending it to shareholders.”
