Bakkavor has agreed to an improved takeover bid from fellow food-to-go manufacturer Greencore valued at £1.2bn.
The agreement in principle, announced on the London Stock Exchange this morning (2 April), follows two previous offers from Dublin-headquartered Greencore that were rejected by Bakkavor over the past couple of months.
The merger is set to create a UK convenience foods behemoth with a combined revenue of around £4bn.
Under the key terms of the new offer, Bakkavor shareholders are still to receive 85p per share and a final dividend of 4.8p payable on 28 May. However, the amount of Greencore shares they are entitled to receive for each Bakkavor share they own has been increased to 0.604. The offer represents around a 33% premium to Bakkavor’s share price of £1.51 per share on 13 March, the day prior to the initial offer period commencing.
Bakkavor shareholders have also seen the ownership share of the enlarged company improved in their favour. The previous deal had offered 40.2% to Bakkavor shareholders, and this has now been increased to approximately 44% with Greencore shareholders taking the remaining 66%.
An additional term in the offer sees Bakkavor shareholders entitled to further cash should its US business be sold by 30 June next year. The London-headquartered group operates 41 sites across its three markets in the UK, the US, and China, supplying around 3,500 products including ready meals, pizza, bread, salads, and desserts to grocery retailers.
A statement from Greencore said that both its board and the board of Bakkavor see “compelling strategic, commercial and financial rationale for the Possible Offer and believe it provides a highly compelling value creation opportunity for stakeholders”. The companies are currently undertaking an exercise to validate the quantity of synergies, which they intend to publish in due course.
Facts and figures
Roughly 85% of Bakkavor’s revenues – which hit £2.3bn for a 5.1% increase on a like-for-like basis in its most recent financial results for the year to 28 December 2024 – are generated in the UK with key customers being major supermarkets including Tesco, M&S, Sainsburys, Waitrose, Morrisons, Co-op, Ocado, and Asda.
The Gudmundsson brothers, who founded Bakkavor as a cod roe manufacturer and importer in Iceland in 1986, still control 49% of the company and are to join the board of the combined group as non-executive directors. Mike Edwards serves as CEO at Bakkavor, with Simon Burke as chairman and Lee Miley stepping up to chief financial officer last year.
The majority of Greencore products (69%) are in the food-to-go category, such as sandwiches, salads, sushi, and chilled snacking, while it also supplies ready meals, soups, sauces, quiches, pickles, and frozen Yorkshire puddings to retailers. It operates 16 manufacturing sites and 17 distribution centres and transport hubs in the UK.
Greencore’s latest trading statement posted yesterday (1 April) for its second quarter ended 28 March 2025 reported continued strong revenue and volume momentum. These were supported by customer growth and new business won during FY24, when it recorded a 28% increase in operating profit to £84.3m from a turnover of £1.8bn. The group said it was now anticipating FY25 adjusted operating profit will be ahead of current market expectations and in the range of £112m to £115m.
Greencore has enjoyed a substantial turnaround since Dalton Philips took the reins as CEO in September 2022, with its share price more than doubling.
Will the merger get through?
The proposed deal may come under close scrutiny from the Competition and Markets Authority (CMA), which recently won its years-long battle to prevent the acquisition of ready-roll pastry brand Jus-Rol by Cérélia.
An overlap is predominantly in ready meals, where Bakkavor is already the number one player, as well as salads, soups, and sauces. However, the overlap does not apply to sandwiches, which is Greencore’s largest category – it made 748m of them in its latest financial year.
“It could be argued that some affected categories are fragmented and would benefit from consolidation, notably ready meals, and that a larger group would be more efficient and therefore potentially able to improve its offer to its customers,” commented Matthew Webb of Investec.
“In some cases, the combined category share would be over 25%, although still leaving multiple competitors of size. We think that the prospects of the deal being cleared (or not) by the competition authorities would depend in large part on how the various categories are defined, which is highly debateable and uncertain,” added Webb.
Mark Lynch, partner at corporate finance advisory firm Oghma Partners, told British Baker that it will be an interesting test for the government’s new, supposed more growth friendly regime.
“It will lead to some interesting discussions and input from the supermarkets and we may see some disposal activity as a result of the combination,” commented Lynch. “It will reduce supplier choice, albeit the strong position of the supermarkets is unlikely to shift the balance of power with regards to pricing in our view.”
GMB Union, whose members working at Bakkavor’s pizza factory in Harrow voted to go on strike in 2023 over a pay dispute, warned that a takeover from Greencore must not result in job losses or factory closures.
“This is a massive merger and could possibly pique the curiosity of the Competition and Market Authority’s new boss,” said GMB national officer Eamon O’Hearn, referring to appointment of former Amazon UK manager Doug Gurr as interim chair of the CMA earlier this year.
“Whether it does or now, companies ‘assessing synergies’ is often management speak for cost cutting,” added O’Hearn. ”It is widely acknowledged by Government and the wider industry, that the UK food and drink industry needs more capacity not less. GMB is calling for a commitment to no factory closures and no job losses.”
Bakkavor also had Unite the Union members take industrial action at its site in Spalding, Lincolnshire, which took months to resolve before finally ending via an improved pay offer last month.
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