Former chairman Lord Chris Haskins (pictured) was speaking to FoodManufacture.co.uk ahead of the January 21 deadline imposed by the UK takeover panel by which Boparan must either come up with a formal offer for Northern Foods or walk away.
He added: “You look at what has happened to Northern Foods over the last few years and it's very sad. You can’t go around roughing up customers in private label."
Ever decreasing circles?
Haskins, who no longer owns shares in Northern Foods, added: “When I left [in 2002], it had a market capitalisation of £1.2bn. Today it’s less than £300m [£287m] and its reputation with customers has been pretty bad. Boparan is much sharper, and he has good relationships with major retail customers.”
Northern Foods, which has closed or mothballed three sites in the last three years after failing to agree mutually satisfactory terms with a key customer (Grantham: M&S; Hull: Morrisons; Swansea: Sainsbury’s), had not covered itself in glory over recent years, added Haskins.
“The proposed merger [with Greencore] is just a case of the lame leaning against the lame.”
Stefan Barden: Two out of three ain’t bad?
While the Northern Foods story was a “very disappointing one of ever decreasing circles” it was however unfair to lay all the blame at the feet of previous boss Stefan Barden, said Shore Capital head of research Dr Clive Black.
“Stefan was handed a very difficult task when he took over [in February 2007], and he leaves the company in a stronger state than when he inherited the business.
“Look at the latest figures as well - where you’ve got good growth in chilled and bakery but problems in frozen – and you could say two out of three ain’t bad.”
Tackling overcapacity in chilled
Similarly, it was easy to knock Northern Foods’ management for the way it had handled negotiations with customers in recent years, added another analyst, but these were taking place at a time when the chilled food market was suffering from overcapacity and many competitors were finding times equally tough.
Similarly, the fact that Barden had been unwilling to spend the £30-40m needed to re-open the mothballed Fenland Foods factory in Grantham without getting concrete volume commitments from any of its key customers was arguably very sensible, added another source.
However, Credit Suisse analyst Charlie Mills said that Northern Foods’ “antagonistic” style was unhelpful, and that there were only so many Mexican standoffs you could have with the leading supermarkets. "You have to work hand in hand with them."
Similarly, while each specific decision to close or sell a site might make sense on its own, the net result was that Northern Foods was getting smaller, he said. “You only have to look at the share price, which has gone from 150p in 2006 to well under 50p until the recent news about Greencore and now Boparan.”
Bosses also seemed to have dithered over some restructuring work, notably in biscuits, proposing to go from three sites to two but then failing to follow through, he added. (As part of the £26.5m 'Project Golden' due for completion in April, Northern Foods is now increasing automation across all three of its biscuit sites - although the 'vision' is still to "move from three sites to two in the medium to longer term".)
Boparan: A credible bidder
As to whether Boparan will table a bid by 5pm this Friday, the consensus in the City appears to be that he will.
As for the price Boparan would have to offer? Says Black: "We believe circa. 75p is the cash price that balances the upside Northern investors may miss from Essenta, against where the share was prior to the merger announcement," said Black. "At 62-65p that balance is under-priced and so we would not recommend that Northern shareholders accept such an offer."
A spokesman for Boparan said he was "well aware that he needs to come up with a solution" to tackle Northern Foods' pension deficit if he does proceed this week, as well as making a tempting cash offer to shareholders.
Click here to read more about Boparan's chances.