The convenience foods manufacturer’s share price fell from 247.2p at about 2pm, to 227.2p at 4.30pm, after investor concerns that Greencore’s US business, Peacock, would lose its contract with Tyson, analysts said. But, despite Tyson Foods’s acquisition, there wasn’t any immediate threat to Greencore, analysts added.
Investment analyst Merrion said: “Tyson Foods is Greencore’s largest contract after the acquisition of Peacock Foods [in December 2016]. Peacock manufactures convenience food products for leading brands in fast-growing categories, in particularly for Jimmy Dean, the leading brand in frozen breakfast sandwiches of which Tyson Food is the owner.
‘Costly and difficult’
“Tyson and Peacock had invested significantly in joint facilities to manufacture Tyson branded products. An attempt to break out of this contract would likely be both costly and difficult for Tyson.”
Peacock Foods has a 12-year relationship with Tyson Foods, and only recently signed a new long-term contract with the US firm, said Merrion. Peacock and Tyson also invested significantly in joint facilities, and it would be “costly and difficult” for Tyson to try and break out of the contract with Peacock, it added.
“Additionally, post Greencore’s acquisition of Peacock, management highlighted that they have had meetings with all of Peacock’s largest customers and emphasised how they ‘expressed their support for Peacock, the acquisition and the continuance of the existing contracts in accordance with their terms’,” said Merrion.
‘Investors’ concerns are overblown’
“Thus, we feel investors’ concerns, although justified, are overblown.”
The analyst continued to rate Greencore as ‘Buy’, it said.
Shares in the food manufacturer was trading at 229.9p at 10am today (May 5).
Meanwhile, Greencore said in January it was confident of mitigating any Brexit-related cost increases. It expected rising costs in 2017 due to currency fluctuations, but supply chain and pricing plans would help to mitigate those costs, it said.
Greencore share prices – at a glance
- Fall of 20p on April 25
- Linked to US customer Tyson Foods’ takeover of AdvancePierre Foods
- Investors’ concerns were “overblown”