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Greencore: Is a management buyout on the cards?

By Jane Byrne , 26-Oct-2011
Last updated on 26-Oct-2011 at 13:39 GMT

A management buyout in tandem with a private equity alliance could be a likely outcome in any change of ownership of Greencore, claims Shore Capital Stockbrokers, following the surprise news yesterday that the manufacturer had received a preliminary takeover approach.

Greencore, issued a stock exchange announcement on Tuesday, revealing that it had noted the movement in the company’s share price and confirmed that it has received an approach “which may or may not lead to an offer for the company”.

The Irish food manufacturer is currently close to finalising the acquisition of Uniq, a UK-based sandwich and dessert maker.

Greencore’s shares were boosted considerably by the news, with the company’s share price finishing up 10 per cent higher yesterday.

Clive Black, an analyst with London based Shore Capital, in a note on the announcement, remarking that he struggled to see any brand owners acquiring Greencore.

“Whilst again in the dark as to whom or what any suitors may be, we cannot rule out that management may be involved in any change of ownership in the business (i.e. an MBO) in tandem perhaps with private equity; we struggle to see any proprietary branded player acquiring it,” said the analyst.

Black added that the business is one of the best prepared food manufacturers in the UK, augmented by the takeover of Uniq, “from which it has yet to harvest the benefits, including substantial tax losses.”

The analyst said that most own label operators in the UK may struggle to digest a business of Greencore’s size, perhaps with the exception of the Kerry Group for which, he notes, there has been speculation about its interest in the Irish food firm for some time.

At the start of 2011, Greencore announced it was proposing to team up with British rival Northern Foods, but this planned merger was spoiled by a move from businessman Ranjit Boparan, who went private with the UK food firm.

Greencore also had discussions with Swiss food group Nestlé after the Northern Foods deal did not bear fruit, while there has been additional speculation that Associated British Foods (ABF) was eyeing up the Irish company.

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