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Greencore has struck a deal to acquire rival UK convenience food group Bakkavor for £1.2bn after being rebuffed with an earlier takeover offer.
Pre-packed sandwich maker Greencore said on Wednesday that the acquisition would create an entity with a combined revenue of about £4bn, as a wave of takeovers continues to shrink the number of companies listed on the London Stock Exchange.
Greencore’s offer of 200p per share for Bakkavor — one of the UK’s largest makers of fresh food, such as ready meals, salads and dips — represents a premium of 32.5 per cent to Bakkavor’s closing share price on March 13.
Bakkavor, whose customers include Tesco, Marks and Spencer, Sainsbury’s and Waitrose, had last month rejected a 189p-per-share offer from Greencore, saying it “significantly undervalued” the FTSE 250 company.
Greencore last year faced pressure from Hong Kong-based activist investor Oasis Management, its largest shareholder, to speed up its turnaround plan and improve shareholder returns. Its share price has risen more than 40 per cent in the past 12 months.
Greencore said on Wednesday that both companies’ boards had identified potential “substantial synergies” from the deal, including in their manufacturing, distribution, purchasing and administrative functions.
It also highlighted potential improvements to supply chains and greater “development opportunities” for employees. In November, Bakkavor was affected by staff strikes over pay that led to a supermarket shortage of taramasalata. The group’s shares have risen more than 60 per cent in the past 12 months.
If the deal goes ahead, Greencore shareholders would own approximately 56 per cent of the combined group with Bakkavor shareholders owning 44 per cent.
The companies said the cash and shares offer, on which they had reached “agreement in principle”, would proceed subject to shareholder and regulatory approval.
Greencore said Bakkavor had indicated its board would be “minded unanimously to recommend” the offer to its shareholders.