‘Hard’ for tycoon to find blend with food groups

The poultry magnate, a major supplier to the UK’s supermarkets, is merging the Leeds-based company with his 2 Sisters Food Group to create a £2bn business.

He beat Ireland’s Greencore to buy Northern with a knockout 73p per share bid.

Mr Boparan has pledged to create a £3bn company by 2015, adding almost £1bn of new sales.

But analysts believe he may be forced to sell Northern’s branded businesses – which include Fox’s biscuits and Matthew Walker Christmas puddings – to meet hefty debt repayments.

Experts also believe he may struggle to retain key staff, and warn this will be crucial to the enlarged group’s success.

Clive Black, analyst at Shore Capital stockbrokers, said: “The big issue is Boparan has acquired a relatively complicated multi-temperature multi-channel manufacturer and that’s going to pose tremendous challenges for his existing management structure.

“It’s critical he can bring across enough of the Northern team to see that through. Competitors are smart and will be looking at some of the talent in Northern.

“He’s been very successful to date and therefore I don’t think you can dismiss his potential to make Northern Foods a success. “That said, he’s taken on a lot of complexity.”

Mr Boparan, a self-made businessman, founded 2 Sisters in 1993 after starting out behind a butcher’s counter. The West Midlands-based entrepreneur made his fortune supplying poultry to the UK’s retailers, and is now Tesco’s biggest chicken supplier.

In 2000 he purchased poultry processor Hillsdown Holdings, and in 2010 he snapped up Dutch poultry firm Storteboom Group, adding £400m of turnover, also buying Yorkshire fish and chip shop chain Harry Ramsden’s.

A source said Mr Boparan will be wary about delegating responsibility. “He’s incredibly hands-on and there’s nobody else who makes significant decisions. But you can’t run a £2bn business when you’re the only one who makes any decisions.”

Merging Northern and 2 Sisters will create a debt-laden group with about 15,000 staff and more than 40 manufacturing sites.

Mr Boparan’s bankers, Goldman Sachs, are marketing a £695m senior note issue which he will use to repay a short-term loan from them as well as clear Northern’s historic debt.

Northern currently pays annual interest of about £15m on its debt. However, Mr Boparan’s bond issue will pay interest of almost 10 per cent annually, meaning the merged group’s debt payments are expected to rocket to about £70m.

He must also inject £15m a year into Northern’s pension scheme.

“He’s taken his business right to the limit with what he can debt finance,” said Dr Black. “We would expect him to sell most of the branded businesses over time to try to reduce debt.”

However, until that happens Dr Black said Mr Boparan must continue to invest in the group’s brands. Northern recently pulled the plug on an unsuccessful £5m marketing campaign for its struggling Goodfella’s pizza brand.

“Brands have to be supported,” said Dr Black. “There is a very material turnaround required at Goodfella’s. Fox’s is a good business that needs continued support. That brings very different skills to the private label area that he’s used to.”

Mr Boparan, who has been touring Northern’s sites, is expected to have firmed up his integration blueprint by the end of June or early July. However, he has yet to elaborate on his plans for the business or where he will cut costs. Northern’s Thorpe Park headquarters in Leeds is expected to be axed, affecting 40 jobs.

“He will run this in an extremely slim way,” said an industry source. “He’s built his business on private label poultry and therefore he’s not by background or culture a strong marketing guy. So he would not be someone who would spend a lot on branding.”

Northern is expected to be de-listed on or near May 11.

A Northern spokesman said: “The current focus at Northern is to work together with the 2 Sisters team to build the integration plan over the coming months.

“Ranjit’s vision, which he has set out to employees, is to grow the combined business from £2bn sales per year to £3bn sales per year by 2015 and clearly that will require a lot of hard work and focus from all of our employees.”

business built on condensed milk

Northern Foods had its beginnings in Hull in 1880 with Pape and Co, a condensed milk importing and wholesaling firm.

In 1942 the business was registered as Northern Dairies and became a public company in 1956.

The company changed its name to Northern Foods in 1972. In the late 1970s it pioneered the chilled ready meal, also embarking on a string of acquisitions.

These included Fox’s Biscuits in 1977, puddings business Matthew Walker in 1992 and pizza business Green Isle Foods in 1995.

In 1998 it de-merged the original Express Dairies business. It moved headquarters from Hull to Leeds in 2005.

In November 2010 it revealed plans to merge with Dublin’s Greencore foods, but this was scuppered by a successful counterbid from Mr Boparan.