Northern Foods favours Greencore

NORTHERN FOODS, the British maker of Fox’s biscuits and Goodfellas pizzas, said a merger with Greencore Plc remains the compelling option for the group.

Acting chief executive Simon Herrick said, however, the board would have to consider a rival bid from Ranjit Boporan if it emerged. Price would determine whether the board would feel obliged to put the offer to shareholders for ratification.

He stressed the company had legal obligations to act in the best interests of shareholders and the business. Boporan has until January 21 to make an offer that could leave the merger with Greencore dead in the water.

Herrick told analysts in Britain the boards of both companies believe the merger offers “a compelling opportunity” creating a larger convenience food business with strong growth prospects.

Northern Foods and Greencore will hold shareholder meetings to approve the deal at the end of January. In a trading update Northern reported sales at outlets open at least a year rose 2.3% in the 13 weeks ending January 1, 2011.

Chilled food sales rose 9.7% in the period and bakery sales increased 5%, while frozen food sales declined 17.2%.

“We remain well-positioned for the uncertain and competitive market conditions which we expect during 2011,” the company said. “Northern Foods has continued to trade in line with market expectations, despite tough market and weather conditions.”

The company can “handle” inflation in input costs this year, Herrick said.

Herrick told Reuters that price would be the determining factor over whether the board would back a possible rival offer from food tycoon Ranjit Boporan.

The chicken producer, who also owns the Harry Ramsden’s fish and chip shop chain, is considering making an offer for the business which if it happens would de-rail its planned merger with Greencore.

“If an offer came in we’d have to consider it and price is going to be key. Our fiduciary duty as board members is to make sure we have considered employees and other stakeholders as well but price will obviously be a key issue,” Herrick said.

Northern Foods had held a number of meetings with Boporan since his approach in December.

The markets remain sceptical a bid will emerge, but the share price has gained in value since the Boporan interest was confirmed in mid-December 2010.