Leading Greencore shareholders are supporting the deal, described by management as an “excellent fit”. Around 37.4% have provided irrevocable undertakings and non-binding letters of intent to support the acquisition and a rights issue to fund it.
Irish giant Greencore is funding the deal partly via a rights issue that raises €80.2m (£70.3m), but also an increased debt facility. Irish stockbrokerage Bloxham hailed a "significant corporate transaction for Greencore", noting its market value of €200m (£175.8m) last night versus Uniq's £113m.
Greencore will retain its headquarters in Ireland, but as part of the acquisition process is also proposing to transfer its listing to the London stock market. It also plans to denominate its results in sterling, a process that analysts believe could take up to a year to complete.
‘Surprised but not surprised’
Those are the words of Shore Capital analyst Darren Shirley and Clive Black in an early morning note, who said: “That Greencore has announced an acquisition and that it is Uniq does not come as a major surprise to us.”
The analysts noted that another potential transaction that“may have been reasonably high on the Greencore ‘maybe acquire’ list was, we believe, RF Brookes/Avana, and the fact that it has not [happened] is, we believe, bad news for embattled Premier”.
Shirley and Black said that, “broadly speaking”, they approved of a deal with considerable merit, despite Uniq’s status as a “troubled business for many years, having being seen as what we deem to be a flawed concept to create a pan-European multi-temperature private label and proprietary brand venture”.
They added that Uniq ceo Geoff Eaton had faced “tremendous challenges to simplify and focus the business on the UK market and he deserves considerable credit for undertaking this at time Herculean task”.
Uniq comprises two divisions, one of which is Food to Go, backed by major customer Marks & Spencer (M&S). The analysts said that Greencore’s increased participation with the retailer was one benefit of the deal.
Problem child Minsterley
The other division, desserts, had “sound premium activity” with M&S, Shirley and Black added. But they identified Uniq’s Minsterley dairy as a “well-known problem child” within the division that brought with it problems stemming back to Northern Foods’ days of ownership, prior to May 2004.
In the spring Uniq completed a review of its desserts business to try to ensure profitability within its ‘everyday’, own-label portfolio. “Dealing with Minsterley will be a key challenge and form of measurement as to the success of the Uniq acquisition for Greencore,” Shirley and Black said.
Julian Wild, corporate finance partner, Rollits, said of the bid: "It was an open secret that Greencore was having a serious look at Uniq. I was surprised by the high price it paid, as it was the only runner in the race which would be prepared to take on the whole business.
Uniq has a profitable sandwich business with M&S and presumably Greencore took the necessary assurances from M&S that it will be able to grow that relationship.
"The big question is over desserts. I hope Greencore has a plan for Minsterly, it has not made money in a long time. One of the dairies might be interested in acquiring it as a standalone business so there might be a back to back deal to be done there. Greencore needed a deal having missed out on Northern Foods"
Shore Capital noted that Uniq's sales in its last financial year were £312m, while Food to Go activity in the past five months had grown by a “more than creditable” 11%.
The analysts also noted Greencore’s third quarter trading statement today, and described 11% overall growth as "excellent".