By Geoff Percival
Greencore’s future as a stock market-quoted company is clouded, a leading analyst has claimed.
It follows the Irish sandwich maker’s shock U-turn on its international growth strategy by deciding to sell its US operations and focus entirely on its British convenience food business.
Greencore has reached agreement to sell its entire US business to contract food manufacturer Hearthside Food Solutions for just under $1.1bn (€950m).
The deal requires shareholder approval and US regulatory clearance, but Greencore hopes to complete it by the end of next month.
The analyst said that post-disposal Greencore could become a takeover target for either private equity buyers or industry peers; given that it will have a lot less debt and sole supply agreements with a number of leading food retailers still in place.
They also suggested that Greencore could have a new chief executive within the next 12 months, questioning whether Patrick Coveney will want to remain the head of a business re-focused on the low-growth UK market having been the main driver of its US growth strategy of recent years.
Mr Coveney yesterday said there had been no strategy to sell up in the US and the group’s improvement plan there was working well.
But, he said Hearthside’s unsolicited offer, received in August, was a strong and unique one that could grant a level of value for shareholders better than Greencore could deliver from the US over the medium term.
“The proposed sale of our US operation represents a compelling and immediate realisation of value for Greencore’s shareholders. We have always had a firm conviction on the underlying value and growth prospects of our US business and believe that this offer fully reflects that,” Mr Coveney said.
Merrion analyst Darren McKinley said the decision to sell out of the US marks “a significant U-turn” for Greencore’s management, “who had talked up the US growth prospects as the rationale for buying Peacock [the US food group Greencore bought in a high profile “transformational” deal in 2016].
“They now state that the price offered was a fair reflection of this growth opportunity and that it permits them to re-focus on their UK market leading business,” he said.
Noting the $250m, or so, Greencore has extracted in value for its legacy US business, Mr McKinley said of the decision to sell: “While surprised by the announcement, we prefer this to asset impairment/write downs in the US, which has been the case elsewhere and was a concern within the Greencore marketplace.”