Bakkavor has rebuffed a £1.1bn takeover approach by food-to-go rival Greencore, a statement released to the London Stock Exchange has revealed.
A merger of the two London-listed companies would create a convenience foods giant with combined turnover of about £4bn.
Greencore confirmed, following a story in Bloomberg, that it made two proposals to Bakkavor regarding a possible cash and shares offer.
Bakkavor’s board rejected the first bid on 25 February and a second approach on 10 March.
Greencore said it offered 85p a share in cash and also some Greencore stock, valuing Bakkavor at £1.1bn. The bid is the equivalent of 189p for each Bakkavor share and represented a 25% premium to the business’ closing price yesterday. In addition, Bakkavor shareholders would retain the right to receive the final dividend declared on 4 March of 4.8p per share.
The deal would mean Greencore shareholders would own 59.8% of the enlarged group, while Bakkavor investors would own 40.2%.
Despite the rejection, Greencore added it would continue to evaluate all strategic opportunities, but there was no certainty a firm offer would be made.
Under City takeover rules, Greencore now has until 5pm on 11 April to make a firm offer for Bakkavor or walk away.
Shares in Bakkavor rocketed by 18.4% as the markets digested the news, with the share price rising to 179p, its highest level since August 2018.
Greencore, meanwhile, saw its share price drop 0.8% to 188.8p.
Bakkavor said, in response to the statement, that its board and advisors carefully evaluated the latest unsolicited proposal and concluded it “significantly undervalued the company and its future prospects”.
Greencore said it believed the second rejected offer provided “a highly compelling value creation opportunity” for both sets of shareholders.
“The enlarged group would create a leading UK convenience food business with a combined revenue of £4bn, with a diverse product offering, strong commercial relationships and market-leading capabilities in attractive segments across the UK convenience food landscape,” the statement added.
Greencore reckoned the cashflow boost from a newly enlarged group, alongside the larger scale brought by the combination, would provide the potential for “significant returns to shareholders and for continued investment in future growth and value creation”. It highlighted “substantial” synergies available following a deal.
A merger would also mean greater innovation and would benefit customers and consumers, Greencore added.
Both groups are part of the FTSE 250 and supply all the major supermarkets with a range of food-to-go products, ready meals and prepared foods, with Greencore generating annual revenues of £1.8bn, while Bakkavor turned over £2.3bn in 2024.
Greencore makes sandwiches and sushi, as well as other products, at 14 factories across the UK, supplying 779 million food-to-go items each year. Bakkavor supplies the major grocers with soups, ready meals, sauces, salads, dips and pizzas. It has faced significant disruption in the past year as a strike at its Spalding site led to shortages of dips, soups, and wraps on supermarket shelves.
Greencore is currently progressing a turnaround, spearheaded by CEO Dalton Philips, and has significantly improved profits thanks to a reorganisation of its operations over the past two years.
Both companies were hit by a slump in sales during the pandemic as consumers cooked more from scratch rather than buying ready meals, while the closure of offices meant demand for sandwiches plunged.
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