The UK’s largest fresh-prepared food manufacturer Bakkavor has turned down a £1.14 billion takeover bid from Irish rival Greencore.
Greencore, Britain’s biggest maker of convenience food-to-go, from sandwiches to quiche, has been stalking its rival sandwich-maker Bakkavor Group to create a dominant food-to-go supplier with around £4 billion in annual revenue.
Both companies mainly sell through stores as well as forecourts including Shell or BP petrol stations, so a merger would give the combined group much more pricing power against some of the world’s toughest corporate customers.
However, Bakkavor has rejected two bids from Greencore, the latest of which would have valued the food manufacturer at 1.14 billion pounds, the companies said on Friday (14).
Bakkavor said the offer significantly undervalued it.
Greencore, which operates in the UK and Ireland, has benefited from resilient demand for its pre-packaged sandwiches, chilled soups, and prepared meals, but it faces higher labour costs after the British government raised contributions from employers.
Greencore said its last proposal, made on March 7, provided a "highly compelling value creation opportunity" for both companies, with bigger scale and cashflows if merged, adding that it was evaluating "all strategic opportunities".
Bakkavor, which operates in Britain, China and the United States, reported 4 per cent revenue growth for 2024.
Under the latest proposal, Greencore shareholders would own about 59.8 per cent of the bigger group and Bakkavor investors would own the rest.
Greencore has until April 11 to make a firm offer for Bakkavor or walk away, under British takeover rules.
Meanwhile, the industry experts feel that last week’s eruption of hostilities between Greencore Group and Bakkavor Group suggests a return to normality on Britain’s high streets, following Sainsbury’s revelation that it is seeing a revival of the weekly shopping habit as working from home begins to fade.
The food-to-go market is reckoned to be back to only "85 per cent of pre-Covid capacity", and trade sources suggest it may take another two years to be fully restored.
Greencore has been grabbing new clients such as Asda, and put a positive gloss on opportunities such as other retailers closing cafés and in-store prepared food services in favour of Greencore’s menu.
