It’s been quite a year for own-label supplier Greencore. A plan to merge with UK rival Northern Foods was gazumped by poultry magnate Ranjit Boparan. Greencore then licked its wounds and acquired UK desserts and sandwich maker Uniq. Now, however, the company is the subject of a takeover approach. Dean Best reports.
Greencore is again in the food industry’s M&A headlines. The Ireland-based group, which supplies own-label products to retailers on both sides of the Atlantic, has spent much of the last 12 months being either reported on as a player in one of the UK food industry’s largest deal in recent months, as a potential bidder for Premier Foods plc’s Brookes Avana unit, a buyer of UK desserts and sandwich maker Uniq and now as a takeover target itself.
After a day in which its share price shot up unexpectedly, Greencore yesterday (25 October) revealed that an unnamed suitor had registered its interest in the business.
“The board of Greencore Group notes the movement in the company’s share price and confirms that it has received an approach which may or may not lead to an offer for the company,” it said in a regulatory filing.
“The board would like to emphasise that the discussions are at a preliminary stage and there can be no certainty whether any offer will be forthcoming.”
The announcement surprised some industry watchers after a year in which Greencore had been on the look-out to add to its business. Indeed, it is only a month since its acquisition of Uniq was finalised. That deal could have been seen as a potential obstacle for any interested party – aside from enlarging Greencore, Uniq does have challenges to surmount, not least in its desserts business.
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By GlobalDataHowever, given the ongoing consolidation of the UK own-label sector, it could be argued that Greencore’s failure to seal its merger with Northern, a much larger deal than its acquisition of Uniq, made the Irish company an attractive takeover target.
Greencore’s statement prompted speculation as to whom the mystery interested party might be. Fellow Irish food maker Kerry Group and Associated British Foods were mentioned as possible suitors, while the likes of Premier Foods plc and Bakkavor were ruled out due to financial constraints.
With trade buyers apparently thin on the ground, attention has turned to private equity and a number of analysts have argued the approach is likely to have come from the financial community.
Shore Capital analyst Clive Black said most own-label suppliers would “struggle” to acquire Greencore because of its size. The company’s market capitalisation, according to data from the Irish stock exchange today, was EUR277.1m. He did cite Kerry as a potential bidder and pointed to “periodic speculation” about the company’s interest in Greencore.
However, Black suggested private equity alongside management could be the likely suitor. Fellow City analyst Andy Smith at MF Global agreed. “Whilst Greencore has not identified the suitor we think it could be private equity in combination with management,” Smith said today.
Shares in Greencore closed at EUR0.72 today, up 5.88% on the day. Black, however, said he would be wary of accepting an offer of less than EUR1 a share. “We believe that existing investors should wait and see the nature of any bid but we would be concerned about accepting an offer for less than EUR1.00; indeed at that level Greencore is far from hot cake territory,” Black said. “However, we also believe that Greencore stock is trading at a depressed multiple even at EUR0.71, following the mark-up after the announcement. Therefore, we reiterate our buy stance on the Greencore shares.”
Greencore has refused to comment beyond its statement and the talks could of course not amount to a deal. Nonetheless, the takeover approach has returned the company to the headlines and added to what has been a tumultuous year for the business.