Greencore talks with bidder fail; but sandwich maker poised for 'future growth'

The sandwich and ready meal suppliers announced six weeks ago that it had received a preliminary takeover approach.

The Irish food manufacturer said it entered discussions with a view to establishing whether a proposal would be acceptable to the Board, which could then be put to shareholders.

“Given the Board's unanimous view on the strong underlying value of Greencore and the current dislocation in global equity and debt capital markets, both parties have agreed to end discussions.​

Accordingly, the Board can confirm that the company is no longer engaged in any discussions regarding a potential offer for the company,”​ claims a statement from the food group, which is headquartered in Ireland but earns 90% of its revenue from the UK market.

Potential buyers ​

At the time of the surprise announcement of an approach to Greencore, investors said a management buyout in tandem with a private equity alliance could be a likely outcome in any change of ownership of the food group.

Clive Black, an analyst with London based Shore Capital, in a note, remarked that he struggled to see any brand owners acquiring the Irish food maker.

“While 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,”​ added the UK food industry specialist.

The market 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.

But Black ranked the business as 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.” ​

Full-year results ​

Meanwhile, Greencore in its full year results for up to September 2011, said that Uniq is integrating well and the business is "well positioned for further progress in FY 12 and beyond". ​

Revenues of £804m (€937m) were up 4.3% on a like-for-like basis and in line with analysts’ expectations.

The ready meals maker said the convenience foods division delivered a good performance in some of the most challenging market conditions in many years with revenue growth of 8% and growth in operating profit of 5.3% leading to an operating margin of 6.7%.

The UK retail market has experienced a difficult year with volume declines for the first time in many years, added Greencore.

“Real disposable incomes have declined; pronounced input cost inflation coupled with tax rises and growing unemployment have held back consumption. The UK business experienced input cost inflation of 4% and this was successfully mitigated through internal efficiency programmes, product reconfiguration and selective price increases,”​ said the company.