Greencore seals £1.2bn Bakkavor deal, ups FY forecasts

(Sharecast News) - Convenience food maker Greencore said it had secured agreement to buy UK fresh food provider Bakkavor in a £1.2bn deal and upgraded full-year guidance after a bumper first half. The offer is 0.604 new Greencore shares and 85p a share in cash, valuing each Bakkavor share at 200p. Greencore said there was scope for more value if there is a sale of Bakkavor's US business.

Earlier in April, the companies said they had reached a preliminary agreement on the cash/shares offer after Bakkavor rejected two previous bids.

The deal will see Greencore control 56% of the combined group, with Bakkavor shareholders retaining the remaining stake. The new company will have a combined revenue of £4bn.

Meanwhile, Greencore upgraded full year guidance after an 81% jump in half-year earnings to £26.7m. It now expects adjusted operating profit of £114m - £117m compared with previous forecasts of £112m - £115m.

In a separate announcement, Bakkavor said like-for-like revenue in the first quarter was up 3.9% to £556.6m, driven by good volume growth internationally and price rises in the UK.

The Unite trade union, which represents workers at both companies, expressed concerns over the takeover, citing low wages and less competition in the sector.

"It is also bad news for consumers as, at a time when prices are already rising, fewer competitors in the market will likely lead to faster price rises," said Bev Clarkson the union's national officer for food.

"Both have a history of paying poverty wages to employees and less competition in the marketplace is likely to lead to long term wage stagnation and potential redundancies."

"Unite is calling for an urgent meeting with both companies' management teams to address these issues and we will be supporting our members throughout this process."

Reporting by Frank Prenesti for Sharecast.com