Northern Foods has insisted that its planned merger with Irish rival Greencore will be able to achieve the GBP40m in cost savings the companies have put forward to investors as a key benefit of the deal.
A Northern spokesperson quelled speculation that many of the cost savings achieved through the merger would be creamed off by the companies’ supermarket customers.
Reports in the UK have suggested that Ranjit Boparan, a food tycoon and Northern shareholder rumoured to be ready to table a hostile bid for the business, privately doubts whether the merger with Greencore will achieve that level of savings.
However, the Northern spokesman told just-food today (18 November) that the number is a “net number” after taking into account the savings retailers would seek out following the deal.
“The significant synergy potential in creating Essenta Foods [the business set to be created through the Northern-Greencore merger] was one of the key planks of this deal when we announced it in November,” the spokesman said. “The net synergies have been costed at a net GBP40 million per year, with the potential for further opportunities. The GBP40 million principally comprises corporate overheads, purchasing and supply chain synergies and financing and tax.”
The spokesman’s comments came as reports emerged that Mr Boparan has entered talks with Northern’s pension trustees, as he prepares to decide whether to make a bid for the manufacturer before a Friday deadline set by the UK’s Takeover Panel.
The Independent today reported that any offer Mr Boparan may make will be dependent on reaching an agreement with the trustees. According to the report, Northern and Greencore took three months to agree terms with the pension trustees before revealing their proposed merger back in November.
Northern and Greencore have committed to put GBP15m annually into Northern’s pension scheme to reduce its GBP142m deficit.
A spokesperson for Mr Boparan said declined to comment and said that they were “working towards Friday’s deadline”.