WHEN food tycoon Ranjit Boparan gatecrashed Northern Foods' merger with Ireland's Greencore just before Christmas, he dangled a very appealing carrot before investors – the possibility of hard cash.
But this week's "put up or shut up" from the Takeover Panel showed how little time Mr Boparan has to scupper the long-planned attempt to create Essenta Foods from the two manufacturers.
The panel gave Mr Boparan until 5pm on January 21 to make firm his intention to bid, or walk away. Northern's shareholders vote on the merger on January 31.
The hurdles to Mr Boparan, a 6.6 per cent shareholder, even submitting a bid are significant. Leeds-based Northern's pension obligations are huge and the Essenta team fought hard to win its pension trustees' backing. "A major challenge for Boparan's bid is likely to be securing the support of Northern's pension trustees," said analysts at stockbrokers Evolution Securities. "Northern has gross pension liabilities of 916m with a deficit of 107m.
"Boparan's potential cash takeover could burden the company with more debt than the all-share merger with Greencore, which might mean a relatively higher level of cash funding and other conditions need to be guaranteed for Boparan to gain the support of trustees."
Funding is another major hurdle. Analysts say Mr Boparan must make a hefty cash offer – at a premium even to Northern's already inflated share price.
Stockbrokers Shore Capital think he will need to offer 75p-80p per share, which would value the Leeds-based group at 351m-375m.
Mr Boparan made his millions through chicken processor 2 Sisters Food Group, growing it from a small scale frozen food firm to a leading supplier to major retailers, employing 7,000 people and earning annual sales of close to 1bn. It has a deep relationship with the UK's biggest supermarket Tesco, even supplying its US operations. As one industry expert put it, the West Midlands entrepreneur is "no mug".
Mr Boparan has expanded his empire through acquisition in recent years. He snapped up Yorkshire fish and chip group Harry Ramsden's a year ago, after buying the FishWorks restaurant and fishmonger chain out of administration in 2009.
Mr Boparan also has heavyweight advisers on board in the shape of NM Rothschild. Also Northern's long-term advisers, Rothschild did not work on the Greencore merger. Instead, that job went to UBS, Northern's stockbroker.
"There's no doubt that it's serious," said a source. "He (Mr Boparan) is a very entrepreneurial character and very able. He will have had a fair degree of encouragement to pursue this." However, it's questionable whether Mr Boparan has the sort of cash needed to pull off an audacious deal such as this.
That's why private equity will be key to any bid from the food tycoon. Northern's chilled business would slot into Mr Boparan's stable, leaving private hyequity to pick over the branded businesses of Fox's biscuits and Goodfella's pizza.
"He's definitely generated a fair bit of other interest," said a source. "Private equity will be interested in getting on board."
Another hurdle lies with investors who have already pledged their stakes in favour of the deal. But serious though these hurdles are, they are not insurmountable.
If Mr Boparan can deliver a hard offer in time, Blackfriar would not bet against shareholders accepting the lure of cash over the all-share merger.
n While all eyes are on the non-food retailers this week – by the way how can so many of them blame the crippling snow in December when we also had crippling snow in December 2009? – next week is the turn of the supermarkets. Bradford-based Morrisons will kick off on Monday, followed by Sainsbury's on Wednesday and market leader Tesco on Thursday.
The food retailers should have suffered less than general retailers as no matter what the economic climate is, the British public like to treat themselves when it comes to festive food.
Tesco is expected to report a robust Christmas, with customers finding it easy to trade up.
Sainsbury's is expected to outperform the market. But there are serious questions being asked about Morrisons. It isn't as well placed for trading up as its rivals and it is facing increasing competition from Asda.
New chief executive Dalton Philips is coming under pressure to come up with an effective strategy.