Greencore throws in towel over bid for Northern

After weeks of mulling over whether to raise its bid for the Leed-based group, Greencore finally said it could not better Mr Boparan’s 73p per share, £342m cash offer.

“For some time the board of Greencore has believed both in the considerable strategic merits of consolidation in the UK convenience food sector and in the strong logic of a combination between Greencore and Northern Foods,” said Greencore.

“After substantial investigation, the board has determined that an improved offer could not be concluded on terms which would deliver sufficiently strong returns to Greencore shareholders.”

Greencore had hoped to merge with Northern to create Essenta Foods, a £1.7bn chilled food specialist with substantial operations in Yorkshire.

But the merger was thrown into disarray when Mr Boparan’s interest emerged late last year. The owner of the Harry Ramsden’s fish and chip restaurant chain plans to combine Northern with his 2 Sisters Food Group, building a £2bn supplier of UK retailers.

Shares in Northern yesterday slipped to 72.75p, just below Mr Boparan’s offer price. Greencore’s shares lifted 2.6 per cent to 1.20.

Mr Boparan bought another 63.8 million Northern shares, 13.6 per cent of the group, for 73p a share. This £46.6m purchase included 38.8 million shares from hedge fund Odey Asset Management.

As a result, the tycoon owns 25 per cent of the company and has the backing of 48.25 per cent of the group’s shareholders.

Analysts said the sense of disappointment from Dublin-based Greencore, which has a cake factory in Hull, a frozen food site in Leeds and a grocery factory in Selby, was “palpable”.

Greencore confirmed it had been working with a “partner” – thought to be private equity – to sell off branded parts of Northern such as Fox’s biscuits and Goodfella’s pizza while retaining the group’s chilled operations. It said this approach was aimed at providing significant funding to “allow Greencore to acquire only the parts of the Northern Foods business with the greatest synergy potential”. But this tactic, which “required a range of stakeholders to reach agreement”, failed to reach fruition. One of the key hurdles would have been securing the approval of Northern’s pension trustees for a deal which would have carved the business up.

Mr Boparan has extended his offer until 1pm on March 16 to win over undecided shareholders.

Mr Boparan has agreed strict conditions with trustees as part of winning their backing. He must seek their approval for any disposal of Northern’s assets worth more than £20m and has also agreed not to pay himself a dividend from Northern for three years.

He will inject £15m a year into Northern’s pension scheme for the next 10 years, significantly less than analysts were expecting. Northern had a £138.9m scheme deficit as of October last year.

Shore Capital analyst Clive Black said: “The sense of disappointment from the Dublin-based company is palpable and understandably so; Greencore showed astute timing and considerable strategic nous in its proposed merger with Northern and so the creation of Essenta Foods in our view.

“However, such a deal could not be put together in the timeframe available that Greencore’s management believed would be in its shareholders’ interests.”

Mr Black added Mr Boparan may also seek to sell off branded parts of Northern, and the merged business could be a weaker rival to Greencore while it is integrating.

“We await to see if Boparan follows exactly the same course as it also seeks to de-leverage, we sense Boparan is close to exceeding its financial comfort level with this deal,” he said.

“Whilst Northern may have been the dream corporate romance there are plenty more fish in the sea – note that Northern and Boparan now face a period of integration and possible distraction.”

Northern has 14 UK sites and 9,000 staff, while 2 Sisters has 12 and eight in Europe, with about 6,000 employees.

Timetable of a failed bid

November 17 – Northern Foods unveils £1.7bn merger with Greencore to create Essenta Foods.

November 23 – Northern chief executive Stefan Barden quits early to join food wholesaler Brakes in new year.

December 22 – Food tycoon Ranjit Singh Boparan confirms thinking of cash offer for Northern.

January 4 – Takeover Panel issues Mr Boparan “put up or shut up” ultimatum.

January 21 – Mr Boparan submits last-minute 73p per share, £342m offer for Northern, winning the backing of its board.

January 24 – Greencore says still “considering options”.

March 2 – Mr Boparan reveals he has the backing of 34.4 per cent of Northern’s shareholders.

March 9 – Greencore walks away from Northern in interest of shareholders.

March 16 – Deadline for Northern shareholders to accept Mr Boparan’s bid.