Shareholders have urged Northern Foods not to sell out on the cheap in the event of a counterbid from poultry magnate Ranjit Singh Boparan (pictured).

Some of Northern’s largest investors, which include Scottish Widows and Legal & General, told management this week any offer from Boparan Holdings must value the company at at least 75p per share.

Merger intergration plans put into motion by Northern and Greencore halted after Boparan confirmed his interest late last year in derailing the proposed tie-up to create Essenta Foods. He built up a 6.6% stake in Northern Foods and was given until 21 January by the Takeover Panel to formally table a bid for the company ahead of an EGM on 31 January when shareholders will vote to approve or reject the Essenta merger.

Northern has confirmed its board would be required to review any offer put forward by Boparan. 

If the merger was approved, the newly created Anglo-Irish entity, which is estimated to reap £40m synergies and £15m annually for Northern’s pension scheme, would likely complete in Q2 this year.  

However Credit Suisse analysts said this week a formal bid was “more likely than not” and expected Boparan to pitch an offer at between 60p-65p a share. However, Shore Capital analyst Clive Black said an offer would need to be at least 75p-80p to discount the potential of the Essenta deal. 

In a trading update last week, Northern continued to recommend the Greencore merger to shareholders. It has dismissed speculation of a dispute with former adviser NM Rothschild, amid accusations, denied by the investment bank, that it passed sensitive information to Boparan. 

Boparan is understood to have the strong backing of retailers, particularly Tesco, with whom he has strong ties and those concerned about the resulting market concentration from a Northern/Greencore tie-up. However question marks remain as to whether he would be able to trump the merger’s estimated synergies and plug Northern’s £142m pension deficit with the support of the company’s pension trustees, whom he met this week.
 
“He’s predominantly private label but may attribute value to possible divestments of some of the branded business, for example Fox’s. But that’s a lot of moving parts to put in place by the end of January,” said one City source. 

“Whether it’s Greencore or Boparan, as long as there’s security of employment and a commitment to the future and workforce going forward that’s all we want to see,” said Bakers, Food & Allied Workers Union national president Ian Hodson.

Read more
Boparan ‘in talks’ with Northern’s pension trustees (18 January 2011)
Boparan told to put up or shut up over Northern bid (5 January 2011)
'A big, big step up’: Essenta synergies create chilled giant (analysis; 20 November 2010)