Greencore, Northern Foods to merge into €2bn company

GREENCORE and British based Northern Foods are to merge, creating a €2 billion company.

Shares in the Irish group rose sharply and were up almost 29% or 30 cent to €1.34 at the close.

Patrick Coveney, chief executive of Greencore, who spearheaded the negotiations, will take over as boss of the new entity, to be known as Essenta Foods.

Northern Foods chief financial officer Simon Herrick will become Essenta Foods’ CFO.

The merger should be completed during the second quarter of next year.

When finalised it will leave the group with a diversified range of chilled and other convenience food offerings. Sandwiches will account for roughly £450 million (€530m) of group turnover out of £1.7bn in total combined sales.

This deal means the group will also be able to borrow at cheaper rates over five-year periods which it could not do before now.

The merger evolved through a “combination of circumstances” and the arguments for the deal are “very compelling”, said Mr Coveney.

It emerged following an initial get-together last August between Ned Sullivan, Greencore’s chairman and his British counterpart.

Combined, Essenta will have 41 plants under its control with 31 in Britain, eight in Ireland and two in the US. Savings and synergies worth over £40m can be taken out of the new entity with about £15m of that coming at the operating costs.

Welcoming the development, NCB Stockbrokers food analyst Paul Meade said “the potential of Essenta to retain the forecast synergies should be to the upside given that the merger combines two of the strongest rivals in the sector without significant customer overlap”.

NCB added the new group will have to deliver on those savings by pulling together the diverse strands of the operation.

Essenta will be headquartered in Dublin but will de-list from the Irish Stock Exchange and is to go for a full London listing.

Both sides hold about 50% of the enlarged share capital while the merger brings together leading brands such as Fox’s biscuits and Goodfella’s pizzas.

Few job losses are expected and will come mainly from within the senior executive levels of the group.

Most of the 17,000 workers can expect to hold on to their jobs, he said.

The deal is subject to clearance from various bodies, including the Irish Competition Authority and will also have to be voted on by shareholders of both companies.

Greencore group sales last year rose by 6.9% to €856m. Group operating profit was €59.7m, an increase of 17.6%.