Terms of a recommended acquisition of Bakkavor by Greencore have been agreed, a deal set to create a UK food-to-go manufacturing business with a combined revenue of £4bn and approximately 30,500 employees.
The boards have twice extended the ‘put up or shut up’ deadline over the past six weeks to allow them to finalise all conditions of the proposed merger and complete due diligence processes following Bakkavor’s acceptance of a third cash plus shares offer from Greencore on 2 April. This had come after two previous offers made earlier in the year had been rejected.
The latest acquisition terms see each Bakkavor shareholder entitled to the base consideration of 0.604 new Greencore shares and 85p in cash per Bakkavor share held. This values each Bakkavor share at £2 (based on Greencore’s share price of £1.90), which represents a premium of approximately 32.5% to the undisturbed closing price of £1.51 per Bakkavor share on 13 March 2025.
The Greencore offer implies that Bakkavor’s entire issued and to be issued share capital is valued at roughly £1.2bn. Greencore shareholders are to come out of the merger with around 56% of the shares in the newly combined company, with Bakkavor shareholders owning 44%.
Bakkavor shareholders may also be entitled to an additional payment if there is a sale of the company’s US business either prior to, or in the agreed time frame after, the effective date of the acquisition. Bakkavor currently employs more than 1,500 people in the US across five factory locations including in Carson, California; San Antonio, Texas; Charlotte, North Carolina; and Jessup, Pennsylvania, with headquarters based in Charlotte.
Commenting on the announcement, Bakkavor chair Simon Burke said: “We are very happy with the progress made by Bakkavor delivering its strategy and significantly improved returns, both in the UK and abroad. We have clear plans for continued growth and are confident in the prospects for Bakkavor over the coming years.
“However, there has always been a clear strategic, commercial and financial rationale for a combination with Greencore. Having considered a combination previously, we believe that this Transaction now proposes terms that we consider are very attractive to Bakkavor’s shareholders.
“The Transaction offers shareholders a significant premium, with an attractive combination of cash on completion and the ability to participate in the future value creation anticipated from bringing the two businesses together. For this reason our board is unanimously recommending it to shareholders,” added Burke.
A statement from Greencore said that the continued strength of its performance has enabled it to pursue a transformative growth opportunity in the acquisition of Bakkavor, describing the merger deal as “an unrivalled opportunity to bring together two highly complementary businesses to create a real UK convenience food champion with combined revenue of £4bn”.
It also noted that Greencore’s ‘food for now’ range (primarily sandwiches, wraps, salads and ready meals) would be complemented by Bakkavor’s ‘food for later’ portfolio, which includes several products it doesn’t make such as pizzas, breads, desserts, and chilled dips.
However, the merger of the two key players in the convenience food sector will likely come under close scrutiny from the UK’s principal competition regulator, the Competition and Markets Authority.
Trading updates
In addition to the acquisition announcement, both firms also released financial statements highlighting sales growth.
Greencore’s H125 results for the half year to 28 March 2025 reported revenue was up by 6.5% to £922m, compared to the £866.1m generated in the same period the year prior. It noted this had been driven by a net new business wins impact of 2.9%, with a positive impact of inflation recovery and price of 2.6%, while overall volumes had risen by 2.5%.
Adjusted operating profit improved by 59.7% to £45.2m thanks to disciplined cost management through operational and commercial excellence initiatives and continued growth with customers, it said.
“While we are mindful of a challenging market environment, and with our seasonally stronger second half still ahead of us, we now expect Adjusted Operating Profit for FY25 to be ahead of previous guidance, in the range of £114-117m,” commented Greencore CEO Dalton Philips. This figure would bring the Dublin-headquartered business to above pre-pandemic levels of profitability.
Bakkavor published a Q1 2025 trading update for the 13 weeks to 29 March 2025 showing a 3.9% increase in like-for-like revenue up to £556.6m. UK sales accounted for £471m of this total, with growth primarily down to price hikes, while it had enjoyed “good volume growth internationally” in the US and China.
The company, which was founded by the Gudmundsson brothers in Iceland in 1986, has since entered into a binding agreement to sell its China business to Lihe Xing (Qingdao) Food Technology Co. Ltd. The transaction, worth £50m on a cash and debt-free basis, is expected to close in the second half of 2025.
Bakkavor has also upgraded its guidance for full year adjusted operating profit to a new range of £120m to £126m.
“The Group delivered a strong performance in Q1 25, with excellent progress against the strategy across all three regions,” said Bakkavor CEO Mike Edwards. “The momentum this has created underpins our confidence in delivering both our increased guidance for FY25, and our ambition of achieving 6% margin in FY27.”
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