Blackfriar: Chicken King to revive Yorkshire firm

In Blackfriar's 20 or so years as a financial journalist, this is the first time he's seen a part offer for a company made at half the previous night's closing price.
Ranjit Boparan is the largest supplier of chicken in the UKRanjit Boparan is the largest supplier of chicken in the UK
Ranjit Boparan is the largest supplier of chicken in the UK

Yet food tycoon Ranjit Boparan is doing just that. He has offered to pay just 15.2p per share for a 29.9 per cent stake in butchers chain Crawshaw - half the price of Crawshaw’s closing share price of 30.2p on Tuesday.

Rotherham-based Crawshaw’s shares closed down 19 per cent at 25.5p following the announcement.

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Crawshaw said the price reflected its share price at the time the deal was hammered out last month. It’s a gentlemen’s agreement.

So will shareholders throw out the modest £5.1m investment that Mr Boparan is offering for the 29.9 per cent stake?

No way. They will support the deal as Mr Boparan is the king of chicken - a canny operator who is bringing in investment, enormous market know-how and a chance for Crawshaw to open dozens of new stores at a time when it has lost its way.

The firm said like-for-like sales fell 3.8 per cent in the 5 weeks to January 1, although this was an improvement on the 8.1 slump during the 4 weeks to November 27.

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“The reason for the price being so much lower than Tuesday’s close is that the deal was agreed a month or so ago when the share price was 15p,” said one insider.

“Tuesday’s closing price was irrelevant. The share price has doubled over the past month. Boparan is putting in £12m in total and that will fund the roll out of new stores.”

This isn’t just about Mr Boparan taking a stake, it is also about the supply agreement with his food company 2 Sisters, ​one of Europe’s largest meat and food producers​.

“Boparan is the largest supplier of chicken in the UK. Yes it’s a good price, but he’s not stupid,” said the insider.

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“He plans to make Crawshaw very successful. This is a supply agreement and a trading relationship. The Crawshaw board wouldn’t have wanted to throw it out on price.”

Crawshaw said it embarking on a “​transformational” partnership with Mr Boparan which will lead to the opening of dozens of new factory shops.

Crawshaw will take surplus meat produced by ​Mr ​Boparan’s 2 Sisters Food Group and sell it in its stores.

Under the deal, Mr Boparan has a warrant to acquire a further 20.1 per cent of the group. Just as importantly, he will become an adviser to the board.

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2 Sisters has been in a quandary about what to do with its excess produce. This is quality stuff and it needs a guaranteed factory outlet to sell its leftovers. The meat producer typically produces 103 to 105 per cent of what it needs so if say Tesco decided it wants to do a bumper weekend of chicken drumsticks, 2 Sisters can fulfil that order.

Some weeks the produce simply isn’t needed by 2 Sister’s valued clients so the firm is left with top quality product that the supermarkets don’t want.

Instead of going to waste, Crawshaw can put it on the shelves quickly, offering customers quality product at the lowest possible prices.

Analysts have likened the deal to the new consumer passion for wonky vegetables. Tesco may want to sell chicken breasts that weigh between 160g and 190g so consumers can buy similar sized portions. Crawshaw will take the chicken breasts that weigh 150g and 200g that the supermarkets don’t want.

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It’s a win-win situation. Crawshaw’s ​customers ​will​ benefit from ​an ​expanded range ​of quality meat ​at competitive prices and 2 Sisters has an outlet that will take what it gets.

Investors are expecting good things for Crawshaw’s shares once Mr Boparan is on board. They can also celebrate the appointment of Jim McCarthy as chairman. He​ has more than ​40 years’ retail​ ​experience​ and was the CEO of Poundland for ​10​ years.

In the past Crawshaw has behaved more like a private company than a PLC, loathe to speak to the press and not interested in raising awareness about the firm.

Mr McCarthy’s lengthy experience should help change that perception.