The transaction is worth £50 million on a cash and debt-free basis and is expected to close in the second half of 2025, although its remains subject to regulatory approval.
Bakkavor’s Chinese business unit manufacturers salads, sandwiches and ready meals from seven manufacturing sites located across China, employing around 2,300 people and supplying retailers and foodservice operators.
In addition to the manufacturing sites, Bakkavor China has a head office and a farm, while it produces approximately 1,100 different SKUs. Last year the business unit generated revenues of £150 million.
The sale will complete Bakkavor’s “exit from the region”, with the group set to use the transaction proceeds to reduce its leverage and support the delivery of its medium-term margin target of 6%. The China business was “historically dilutive” to group adjusted operating profit margins.
It also comes amid Greencore’s attempted acquisition of Bakkavor after a deal worth around £1.2 billion was agreed between the two firms earlier this month.
Negotiations remaining ongoing over other aspects of the deal, with the ‘put up or shut up’ deadline recently extended until 5pm on 9 May following a request from Bakkavor.
The buyer, Lihe Xing (Qingdao) Food Technology Co, is wholly owned by Lihoo’s (Qingdao) Food Industry Company, a food technology business based in Tsingtao, China.
“Over the last 20 years, we have built a great business in China and I would like to thank all our China colleagues for their contribution to the significant progress we have made in recent years,” said Bakkavor CEO Mike Edwards.
“With strong foundations in place, we are confident that going forward the business and its stakeholders will benefit from Lihoo’s local expertise and experience as a frozen and fresh meal manufacturer.
“We remain focussed on delivering the great service our customers are accustomed to whilst we work towards completion.”
Julian Wild, food sector analyst and director at law firm Wilkin Chapman Rollits, told Food Manufacture that the deal was likely completed in anticipation of the merger with Greencore.
“This is a bit of necessary tidying up of the Bakkavor portfolio ahead of the sale of the group to Greencore, who will have had no interest in the Chinese businesses of Bakkavor,” Wild said.
“This looks like a fire sale at only 50% of turnover of the China operations in order to remove one potential obstacle to the bigger deal with Greencore.”
