Geest shareholder beefs up stakes

Fresh foods group Geest found itself at the centre of takeover speculation today after Icelandic investors swallowed a larger slice of the company.

Bakkavor – a convenience food company that produces ready meals and dips supermarkets – revealed it had upped its stake in Geest to 16.15%.

The move sparked a 3% surge in shares of Geest as investors noted the second significant investment by Bakkavor in less than two weeks.

The group tripled its stake to 10.27% on May 28, although its executives have publicly denied they are preparing to mount a takeover bid.

Chairman Agust Gudmundsson said at the time that its stake was a “long-term strategic investment” and the group had “no present intention” of making an offer for Geest.

Bakkavor employs 2,500 staff in the UK at three factories in London and a facility in Birmingham.

It generates £138m (€209m) in annual sales to customers including Tesco, Marks & Spencer, Waitrose, Sainsbury’s, Somerfield and Morrisons.

But its performance is dwarfed by that of Geest which reported sales of £868m (€1.3bn) in the 53 weeks to January 3.

Both companies operate in the same sector with ready-made salads, pasta, pizzas and desserts forming the core products manufactured by Geest.

The Peterborough-based firm employs more than 10,000 staff and has factories around the UK including Spalding in Lincolnshire and Selby in North Yorkshire.

Geest posted a 6% rise in annual profits to £46m (€69m) in April and the steady growth of the business was a key reason why Bakkavor has moved to increase its stake.

Sales improved by 12% last year despite challenging conditions for food manufacturers stemming from rising overheads and crop prices.

Geest is also optimistic that the high-profile debate over the nation’s eating habits will bring higher sales in future.

A further boost could come at French business Crudi, which supplies products including the shredded lettuce and onions that are placed inside McDonald’s hamburgers.

The US fast food giant is set to broaden its menu across Europe to include more salad-based products and this was likely to benefit the company in 2004. Geest has already seen higher sales to McDonald’s in the UK.