Greencore ICL deal ‘good for sector’: City analysts

ICL is an own-label chilled ready meals business based in Consett, County Durham with a turnover of £45M. Most of its sales are to existing Greencore customers, said Greencore.

Clive Black, analyst at Shore Capital, told FoodManufacture.co.uk: “ICL fits in pretty well with Greencore’s existing business. The deal gives it increased capacity in prepared foods at an affordable price.​

“Its existing prepared foods facilities were pretty fully utilised, so the extra capacity will be useful. It hasn’t revealed the price it paid but Greencore’s management are pretty and canny and we don’t sense they will have over paid.”​

£9–10M​

He suggested Greencore would have paid about £9–10M, and added: “It’s a bolt on rather than a strategic acquisition.”​

Another analyst said: “Greencore is capacity constrained in its existing own-label ready meal business and it has been able to buy in additional capacity at a reasonable price. The alternative would have been building brand new capacity, which would have added capacity to the industry, which is what nobody would want.​

“In terms of revenue, with sales of £45M in the context of turnover of about £1.1bn, it’s not a hugely relevant, but this deal is about adding capacity.”​

Julian Wild, food group director at legal firm Rollits, said it was an attractive deal for both parties. “​It’s a logical deal in that ICL was a non-core business for Hain Celestial so they were happy to come out of it. And it operates within Greencore’s core area of chilled- and extended-life ready meals into the major retailers so it fits within the areas that Greencore is growing in.​

“There are few opportunities to buy a reasonably-sizeable businesses in that sort of category, so it was a good opportunity for them."​

Core business​

He suggested Greencore should be able to improve the profitability of ICL. “It will be more of a core business for Greencore than it was for Hain so they will be able to give it more focus. There are synergies and costs they can take out.”​

The acquisition was also positive for the sector. “It’s a further piece of consolidation in the chilled convenience food market. Historically, the chilled convenience food market has not been massively profitable and, by consolidating it, they are hoping to make it more profitable.”​

A spokesman for Greencore commented: “We are already a ready meals manufacturer so it is a bolt on to our existing business.”​

He added: “It is a modest acquisition but it increases our capacity and gives us an opportunity to grow. ICL serves many customers who are also customers of Greencore so it gives us extra scope. We are excited at the prospect of welcoming the new site and we are already working on integration.”​

He said the acquisition was unlikely to have a significant impact on ICL personnel or the site.