Greencore has reportedly upped its bid for rival Bakkavor in a renewed attempt to engineer a mega-merger of the two food-to-go giants.
Bakkavor has already rebuffed two offers from Greencore, including a £1.1bn approach earlier this month. The price “significantly undervalued the company and its future prospects,” it concluded.
Bakkavor is currently weighing up the latest proposal although there is no indication it will accept, Bloomberg has reported. A merger would create a company with combined sales of £4bn.
The previous offer gave Greencore shareholders 60% of the new company, while Bakkavor investors would take 40%.
Under City takeover rules, Greencore has until 5pm on 11 April to make a firm offer or walk away.
Bakkavor’s share price is up around 15% this year, giving the company a market value of about £980m. Its founders, the Gudmundsson brothers, still control 49% of the company, while 20% sits with US private equity firm Long Range Capital.
Matthew Webb at Investec suggested the owners will require a larger share price premium than is typically demanded by institutional shareholders to reflect the value of the further potential for UK margin recovery and the growth potential of the US business.
The UK accounted for about 85% of its total revenue last year. Its future in China is uncertain with a review currently underway.
Greencore is looking to boldly grow after a dramatic turnaround under CEO Dalton Phillips. Its share price has more than doubled under Philips’s leadership, helped along in December by stronger-than-expected annual results that saw operating profit rise 28% and dividends reinstated following a five-year hiatus.
Bakkavor and Greencore both declined to comment.
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