Greencore Group is to sell its entire US business to an affiliate of Hearthside Food Solutions in a $1bn (£817m) deal.
The company, which invested heavily in the US two years ago with the £600m acquisition of Peacock Foods, said the sale would enable it to focus on the UK and extend its strong position in the food-to-go market. Hearthside is a US contract food manufacturer.
The US operation has been challenging, with Greencore CEO Patrick Coveney splitting his time between the UK and the US following a restructure, and the business recently reporting that problems in the US business had impacted profits.
Coveney today (15 October) said he believed the sale of the US operation represented a “compelling and immediate realisation of value for Greencore’s shareholders”.
He added he was confident Greencore could deliver further growth and returns in the UK market.
“The proposed transaction would enhance our strategic and financial flexibility, which would allow us to build on our industry-leading position in our core UK market whilst also taking advantage of emerging organic and inorganic growth opportunities,” he said.
With regards to the UK business, Greencore said the deal would enable it to:
- extend its position in the growing convenience food market
- deepen its long-term partnerships with customers
- execute value-creating initiatives
- focus the organisation on UK opportunities with a strong team of leaders
- drive sustained growth, returns and cash flow for shareholders.
The deal will enable Greencore to declare a special dividend of 72p per share to shareholders as soon as practicable. Up to £293m will to be used to reduce debt.
Completion is expected by late November 2018, depending on approval of Greencore shareholders and US anti-trust clearance.
Recent UK activity by Greencore has included the sale of its cakes and desserts business in Hull to Bright Blue Foods and the closure of its desserts facility in Evercreech, Somerset. The moves marked Greencore’s exit from the UK cakes and desserts sector.