Greencore aims for strong profits amid Bakkavor takeover bid
- Greencore forecasts underlying operating profits to reach between £112 million and £115 million amidst strong revenue growth.
- The company is in talks to acquire rival Bakkavor, having made several proposals that were initially turned down.
- A potential merger could create a combined entity with annual sales of approximately £4 billion, strengthening their market position.
In the United Kingdom, Greencore has announced that its full-year earnings are expected to surpass initial forecasts due to solid sales and effective cost management. The company, which specializes in convenience food and supplies all major UK supermarkets, reported strong revenue growth fueled by new customer acquisitions during its second-quarter period ending March 28. Greencore's ongoing commitment to controlling costs has also played a crucial role in boosting profits, leading the company to project underlying operating profits of between £112 million and £115 million for the fiscal year ending September 26. The announcement comes at a time when Greencore is actively pursuing a takeover of rival fresh food producer Bakkavor, which is also listed on the FTSE 250. Greencore has made multiple approaches to Bakkavor in recent weeks, including a revised proposal that valued the company at approximately £1.1 billion, although these initial offers faced rejection from Bakkavor's board, which deemed them inadequate in relation to its growth potential. On a more favorable note, Greencore has recently reached an agreement in principle for a potential £1.2 billion takeover of Bakkavor, promising shareholders 200 pence per share, representing a 33% premium to the company's recent closing price. If the deal proceeds, it could create a significantly larger food group with projected annual sales nearing £4 billion, enhancing market competition and operational capacity for the combined entities. Bakkavor's board has indicated that they are likely to support the takeover should a formal offer be made by Greencore. The merger plans propose that Greencore shareholders would hold approximately 56% of the new entity, while Bakkavor shareholders would retain around 44%. Additionally, the agreement includes stipulations regarding a financial payout to Bakkavor shareholders in the event of a decision to sell its US division within a year following the acquisition. Both firms believe that substantial synergies will arise from the merger, and they are currently assessing the potential benefits, which they plan to disclose in future communications.