Bakkavor ditches plans for stock market flotation

By Rick Pendrous

- Last updated on GMT

Bakkavor founders, Lydur (left) and Agust (right) Gudmundsson
Bakkavor founders, Lydur (left) and Agust (right) Gudmundsson

Related tags Initial public offering Stock market

Bakkavor, the own-label chilled foods group, has ditched its plans for a £1bn-plus stock market flotation, in an announcement released today (November 3) because of “current volatility” in the market.

The fresh-prepared food group formally announced its intention to float on October 10 this year, following earlier disclosures in the press.

“Bakkavor … will no longer proceed with its plans for an initial public offering,” ​the group announced in a statement issued this morning.

“Whilst the company received sufficient institutional demand to cover the offering, the Board has taken the decision that proceeding with the transaction would not be in the best interests of the company, or its shareholders, given the current volatility in the IPO ​[Initial Public Offering] market.”

‘Surprised and disappointed’

Responding to the news, Dr Clive Black, an analyst with stockbroker Shore Capital, said: “We are very surprised and disappointed by this announcement as we were looking forward to a new listing in the UK food producing sector and so learning more about Bakkavor.

“We also feel very much for the management and their advisors, who will have put a lot of effort into listing the business.

Black said that the reasons for the decision were not entirely clear, although he added: “We note reference to ‘market volatility’ in some financial market news wires, noting a separate IPO of Arqiva was also pulled today, as the prime reason.

“However, we struggle to see the UK stock market as being particularly volatile at the moment. Most equity indices are highly valued at the moment, favouring listings, and the FTSE-100 took an interest rate rise in its stride yesterday, actually rising.

“Accordingly, we sense something within the detail of the deal has happened for the game to be called off before the teams take the pitch. Whether or not this is a postponement versus a cancellation remains to be seen; a very large consortium of advisers will, no doubt, be hoping for the former.”

Julian Wild, a partner with corporate finance specialist Rollits, said: “I think Bakkavor is an excellent business and would be an good addition to the quoted food sector alongside companies like Cranswick and Hilton.

‘Uncertainty ahead of Brexit’

​Unfortunately there is a huge amount of uncertainty ahead of Brexit, with commodity prices, currency, retailers under pressure etc. I think the timing was just wrong and may remain that way for a few years. Hard to see the climate improving in the short term.

Following the earlier press disclosures that Bakkavor was working with Rothschild on plans to float and valuing the business at £1.5bn, an unnamed industry expert also told​ that it would make an “excellent addition” ​to the stock market.

“The UK traded food sector is so thin that a large, successful business like Bakkavor would be an excellent addition, after the loss of companies like Northern Foods,” ​said the source.

“They ​[Icelandic owners Agust and Lydur Gudmundsson] have done very well to weather the storm of the banking crisis of 2008, and the Icelandic situation ​[financial crisis between 2008 and 2011]. They have continued to trade well, and are a well-run business.”

Bakkavor is the second-highest ranked food business on The Sunday Times ​rich list, taking the 28th position. It reported £1.7bn in sales last year, with profits of £144M.

The group employs more than 18,000 people across 51 sites globally. It has 30 facilities in the UK, and manufactures about 5,000 different products across 18 different food categories.

Last Wednesday (November 1) Bakkavor Hitchen Foods picked up the award for Training programme of the year in the Food Manufacture Excellence Awards, which took place at the London’s Hilton in Park Lane.

Meanwhile, Bakkavor won the coveted Training Programme of the Year award​ at the Food Manufacture Excellence Awards on Wednesday (November 1).

Related topics Chilled foods

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