Market waits as Greencore continues to consider options

IRISH company Greencore has reiterated that a merger with Northern Foods would yield savings of “at least” £40m annually, as speculation continues to mount that it may offer a cash sweetener to complete a deal with the Yorkshire group.

West Bromwich entrepreneur Ranjit Boparan, owner of Harry Ramsden’s, lodged a £342m bid for Northern Foods on Friday evening as a specially extended deadline from the Takeover Panel loomed.

The Northern Foods board responded by reversing its previous support for a merger with Greencore, to form a new company called Essenta Foods, and urging shareholders to accept the Boparan bid worth 73p per share.

In a statement required under British takeover rules, Greencore said yesterday evening it would save some £15m from overhead cost savings, £20m from purchasing and supply-chain improvements, and £5m from financing and tax efficiencies if the merger took place.

• Latest Northern Food share price and historic data – click here

At least half of these synergies could be realised within a year of merging with Northern, with the full amount being achieved by the third year of the merger, it said.

The statement came amid rising expectations that Greencore may try to top the 73p-a-share cash offer for Northern made by chicken tycoon Ranjit Boparan last Friday.

By the close of trading yesterday, shares in Northern had risen to 74p.

Last November, Greencore and Northern agreed a “merger of equals” to create Essenta Foods in an all-stock deal.

Mr Boparan subsequently made an all-cash bid for Northern that far exceeded Greencore’s offer.

The offer represents a 51.6% premium on the share price of 48.2p implied by the terms of the merger.

In its statement yesterday, Greencore said it “recognised the importance attached by the Northern Foods board to the certainty of cash value in their decision [to back the bid]”.

It added: “Given this development, the board of Greencore will now consider its options and as part of this process intends to seek the views of both Greencore and Northern Foods shareholders.”

Analysts are divided on whether Greencore will return with a counter offer or walk away from the situation.