Pressure on Greencore to up stakes in Northern bid

By Ben Bouckley

- Last updated on GMT

Related tags: Private equity firm, Batchelors

Ranjit Boparan: Could his 11.4% stake in Northern Foods prove decisive?
Ranjit Boparan: Could his 11.4% stake in Northern Foods prove decisive?
Greencore is under pressure to table a viable counter-bid by March 2 to beat Ranjit Boparan in the struggle to takeover Northern Foods, but still has advantages on its side if it does do so, says one City analyst.

Sources close to this publication suggest that media reports today, claiming that the Irish convenience food producer had teamed-up with New York private equity firm Och Ziff Capital in a joint bid for Northern, are wide of the mark.

However, talk still persists that Greencore is seeking private equity or trade support in a last-ditch attempt to trump Ranjit Boparan’s 73p/share all-cash bid for Northern, which the latter’s board recommends to shareholders, who have until 1pm on March 2 to accept or reject Boparan's offer.

One source suggested that Greencore’s previous emphasis upon £20m in cost synergies (as a result of tying-up with Northern on the basis of its initial £236m all-share deal last November) risked being wiped-out if it had to stump-up a substantial cash element to trump Boparan’s £342m offer, which the 2 Sisters Food Group owner made via a subsidiary company BH Acquisitions.

Moreover, rumours abound that Northern’s pension trustees are opposed to any break-up the company (which would see any Greencore partner take over the branded parts of the business leaving Northern’s own-label operations to the Irish firm), which is likely if Greencore ties-up with any private equity or trade player.

Clock ticking for counter-bid…

Asked about these possible problems, Darren Shirley, analyst, Shore Capital, told “Without knowing the details of any possible counter-offer, it’s hard to know how any potential deal could work.

“But we said at the start that we wouldn’t rule out a counter-bid, involving either a private equity firm or another large industry player.

“There’s certainly merit in the tie-up in own label between Greencore and Northern, and any spin-off of the latter’s branded business (Goodfella’s and Fox’s Biscuits) ​[in the event of a trade/private equity tie-up] wouldn’t necessarily be a problem.”

Boparan's potential blocking vote

However, Shirley said that Boparan might have the power to stop any rival bid in its tracks: “Boparan now has over 10% ​[11.4% of Northern's shares] which is potentially a blocking stake. The deadline for any rival bid of March 2 is also fast approaching, so the pressure is on Greencore to get something out in the next week. I wouldn’t rule that out though.”

Northern Foods' shares have been trading at around 74-75p (74.12p as we went to press) since Boparan tabled his 73p/share offer, which suggests that the markets are still pricing-in a possible counter-bid.

However, City analysts we contacted last week​ said that, given the short timeframe available to finance a second bid for Northern with a third party, Greencore might do better to set its sights slightly lower, and aim for acquisitions such as Premier Foods’ own-label businesses Brookes/Avana.

Related topics: Ambient foods, Bakery, Chilled foods, Frozen

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