Cargill and Faccenda deal ‘to prompt cost scrutiny’

By Michael Stones contact

- Last updated on GMT

Faccenda’s planned joint venture with Cargill Chicken UK will lead to scrutiny of overheads, predicted Shore Capital
Faccenda’s planned joint venture with Cargill Chicken UK will lead to scrutiny of overheads, predicted Shore Capital

Related tags: Joint venture, Unite the union, Mergers and acquisitions, Clive black

The poultry joint venture proposed by Cargill Chicken UK and Faccenda will lead to scrutiny of overhead costs, according to City analyst Shore Capital, as Unite the union offered a cautious welcome to the plan.

While the two privately-owned businesses were unlikely to highlight financial synergies arising from the joint venture, Shore’s Clive Black and Darren Shirley said: “… clearly, central overhead rationalisation and sourcing opportunities would be expected to be early ports of call …”

Also, operational integration could follow a review of the two poultry processors, they added.

The two firms revealed plans for a 50:50 merger between Cargill’s UK fresh chicken division and Faccenda’s fresh chicken, turkey and duck business, Cherry Valley, on Monday (September 25). “The new venture will be a demonstrable new force in the market, further concentrating activities,”​ said Black and Shirley.

The new business would have an annual output of 200M chickens, under the leadership of Andy Dawkins, current md of Faccenda.

Annual output of 200M chickens

Commenting on the deal, Faccenda Investments ceo Ian Faccenda said: “The new joint venture​ confirms our long-term commitment to being a responsible partner across the entire supply chain, providing stability and security to our customers, suppliers and growers for years to come.

“This is an exciting time. We are bringing together talented people from both businesses with complementary values and expertise, and giving them the opportunity to develop and be successful in a new business with the capability to grow.”

Shore Capital predicted the proposed merger – involving the UK’s third and fourth largest chicken operators – would attract the attention of the Competition and Markets Authority (CMA). “Albeit, the CMA can, at times, live in a parallel universe unbeknown to mankind,” ​noted Black and Shirley.

‘Parallel universe unbeknown to mankind’

The CMA revealed plans​ last week to probe Tulip’s acquisition​ of pig producer Easey Holdings.

Meanwhile, Unite’s lead national officer for the food sector Joe Clarke said: “We are giving this proposed merger a cautious welcome. It is early days for this joint venture, but we think that this agreement may be a positive development for both businesses.

“It will increase the strength of these companies within a very tough sector, especially as Brexit looms.”

Job retention was a key goal for the union, which has about 2,000 members in both companies, said Clarke.

Unite has members at the Cargill poultry sites at Hereford, Newent in Gloucestershire and Wolverhampton, and at the Faccenda plant at Brackley, Northamptonshire. The consultation process starts on Monday October 9.

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