Greencore to acquire US firm Peacock Foods in £600m deal

Convenience food business Greencore – which describes itself as the largest sandwich manufacturer in the world – is set to ramp up its US profile with the acquisition of Peacock Foods.

Under the proposed deal, Greencore will pay $747.5m (£594.3m) for Illinois-based Peacock, which operates in categories including frozen breakfast sandwiches, kids' chilled meal kits and salad kits.

Peacock generated revenues of around $1bn (£800m) and adjusted EBITDA of $72.1m (£57.5m) in the year to September 2016.

Peacock operates from seven facilities that will create a network with five times the footprint of Greencore's current US operation.

The US firm has long-standing relationships with businesses including Tyson Foods, KraftHeinz and Dole, and senior Greencore executives have met with customers who represent about 70% of Peacock's revenues. These support the acquisition and continuation of existing supply agreements, said Greencore, adding that Peacocok’s contract model includes co-investment with customers for capital expenditure on new projects.

Significant scale

"The acquisition of Peacock will transform our US business, strengthen our position in high-growth categories, broaden our channel and customer exposure, and add significant scale to our operations,” said Patrick Coveney, CEO of Greencore, which today announced full-year reported revenue up 10.6% to £1,481.9m.

“We believe Peacock's success is built on the same fundamental strategy and values that drive Greencore, making products that consumers love, building deep, longstanding relationships with customers, investing in high quality manufacturing capacity, food safety capability and people.”

Greencore added that the deal will bring experience in automation, project engineering and packaging formats to Greencore's existing competencies in food safety, innovation, new product development, and short shelf-life food manufacturing. The business added that this broader set of capabilities would create opportunities to bring new products to existing customers and to develop new channels.

"We have been particularly struck by the similarities in the way we run our business and our mutual long-term commitment to the US convenience food market,” said Peacocok Foods CEO Tom Sampson. “We are excited by the opportunity we now have to leverage Greencore's expertise in innovation and fresh food manufacturing, thereby bringing a broader set of capabilities to our customers."

Management team

Greencore’s new US division, which will include Peacock, will be led by Chris Kirke, while Sampson will become a senior advisor to manage customer transition and integration over the next two years. The new management team will be made up of members of Greencore's and Peacock's current senior management teams.

The acquisition will be financed through a combination of a fully underwritten rights issue offered to qualifying shareholders to raise £439.4m, and about £200m in debt facilities. The deal must be approved by shareholders, and the business will hold an Extraordinary General Meeting on 7 December 2016 for approving the deal. It is estimated the acquisition will complete on 30 December.

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