Analyst Nicola Mallard told Food Manufacture.co.uk: “This acquisition takes Greencore’s US business off the critical list. After warning only three months ago that the US business was potentially under review if the outlook did not improve, recent progress has been very encouraging.”
Greencore is now quite literally “on a roll” in the US, after securing Schau bringing a $50M business win, she said.
With the deal comes an arrangement to provide sandwiches to the east coast and mid-west depots of a national food service chain. Greencore said it had “ … put in place a multi-year partnership with the new customer to supply its stores with approximately $50M of Food to Go products on the east coast and in the mid-west from four of Greencore’s facilities.”
The delivery of this new business will be phased in between September 2012 and March 2013. The deal also brings assets in Chicago and Florida.
Firmly in the black
Together with the MarketFare purchase earlier this year, the acquisition should move Greencore’s US business firmly in the black in the financial year 2013. “Achieving annualised revenue of about $240M should be profitable. It won’t be making a fabulous margin but it is getting there,” said Mallard.
Although the biggest sandwich maker in the UK, Greencore had found the going tough across the Atlantic, she added. “They have focused on the east coast and this deal, with the facilities in Florida, helps.” Initially the firm “probably took on too many customers and too many products”, she added.
As well as fresh sandwiches and sushi, Schau produces fresh entrees and other ready-to-eat items, sold through both the convenience store and grocery retail channels.
The firm reported revenues of £20.5M ($32M) for the year ended December 2011.
Greencore now has six US facilities, covering the east coast and mid-west, with the potential to handle up to $350M of revenue.
A Greencore statement said the deal will “build on the acquisition of Marketfare Foods in April 2012 by adding scale with 7-Eleven, to whom Schau is a long-term supplier in the Chicago region”.
Greencore will pay upfront £8.3M ($13M) plus a deferred cash consideration of £2.8M ($4.3M). An additional cash amount of up to £1.3M ($2M) will be payable dependent on certain performance conditions.
The purchase will be funded from existing debt facilities and will have a minimal impact on the group’s leverage, said Greencore.
Patrick Coveney, the firm’s ceo, said: “Schau, along with Marketfare, will allow us to take a strong step forward in executing the next stage of our US strategy.
“Greencore now has a Food to Go platform in the US that will not only enable us to better serve our existing customers, but also to support what is a significant and exciting new business opportunity.”
Earlier this month Greencore sold its troubled Minsterley desserts business to Muller Dairy UK. For more information, click here.
To read more about Marketfare, click here.