UK fresh prepared foods company Geest has said it has reached agreement with Bakkavor to allow the Icelandic company to carry out due diligence on Geest.

Geest said that due diligence, based on an offer price of 655p per Geest share in cash plus a special dividend of 7p per share, is expected to be completed during February, but added that there can still be no certainty that an offer for the company will be made.

"At this value in cash, Bakkavor's indicative offer allows us to move into due diligence and continue our discussions, which have been both business-like and friendly," said Sir John Banham, chairman of Geest.

"It is very encouraging that we have reached this stage which allows us to enter into more detailed discussions which we hope will lead to a positive outcome," said Agust Gudmundsson, executive chairman of Bakkavor.

Bakkavor makes chilled convenience food such as ready meals, snacks and dips, and has offices in the UK and Iceland. Its customers include major UK retailers Tesco, Marks & Spencer, Waitrose, Sainsbury's and Somerfield.