Greencore counter-bid under fire

THE latest move by Greencore Group to mount a counter-bid for Northern Foods has been criticised by two leading Irish stockbrokers as bad for the company’s shareholders.

Their remarks follow reports from Britain yesterday that Greencore had lined up a private equity (PE) firm to examine the possibility of making an offer for the business. Northern Foods are the makers of Fox’s biscuits and Goodfella’s pizzas.

Greencore has been given access to Northern’s latest results as it reconsiders its options.

Northern has not been given the name of the PE group because it wants its identity kept out of the public domain until it has decided whether to launch the rival bid.

Northern has an offer of over €400 million from the British-based businessman Ranjit Boparan.

His all-cash offer derailed Greencore’s agreed merger with the group that was recommended by both companies.

NCB’s Paul Meade, commenting yesterday on the latest developments in the British market, strongly advised against Greencore engaging in a takeover duel with Boparan.

While there are attractions in a merger, Meade concluded: “We believe Greencore shareholders would suffer value destruction if its board enters a Dutch auction to secure Northern Foods, given the punchy valuation multiple of the BH (Boparan) offer and the challenging trading environment facing food manufacturers in the UK.”

He repeated his earlier assertion made after Boparan put its cash offer on the table, that Greencore should pull out of the process.

“We believe that Greencore’s best option is to exit the bidding process for Northern Foods, to focus on the challenge of protecting its margin against input inflation rather than risk its balance sheet in a Dutch auction,” he said.

Bloxham’s Joe Gill questioned the value aspect of any such deal from a shareholder viewpoint. In a note yesterday he said he found it hard to see how a merger would be earnings-enhancing. With Greencore’s shares currently trading at 5.7x earnings and Northern on 6.6x “we struggle to see how a PE/Greencore consortium can deliver value for shareholders”.

Boparan has committed to keeping Northern together unless pension trustees vote otherwise.