UK convenience food producer Greencore has agreed to acquire its competitor Bakkavor in a £1.2 billion ($1.55 billion) deal, creating a major player in the British ready-to-eat food market.
After two earlier rejections, Greencore secured the agreement with a new offer of 200 pence per Bakkavor share, representing a nearly 6% premium on its previous bid of 189 pence. The deal will be a combination of cash and stock.
Following the announcement, Bakkavor shares jumped almost 8% to 192 pence, while Greencore's stock dropped nearly 3%.
Bakkavor supplies major retailers such as Tesco, Marks & Spencer, and Waitrose, while Greencore counts all the UK’s top supermarket chains among its clients.
“We're pleased that a resolution has been reached quickly, and we increasingly see the strategic value in a Greencore-Bakkavor merger,” analysts at Jefferies commented.
According to the deal terms, Bakkavor shareholders will receive 85 pence in cash and 0.604 Greencore shares for each Bakkavor share. Additionally, they will be eligible for a contingent value right if Bakkavor's U.S. operations are sold before June 30, 2026.
Greencore has seen growth fueled by rising demand for pre-packaged meals, though rising labor costs have weighed on profits. Meanwhile, Bakkavor has been restructuring its U.S. operations following cost overruns and weak consumer demand.
The merger is set to be recommended unanimously by both companies. Bakkavor’s founding brothers, Agust and Lydur Gudmundsson, will join the board of the combined company as non-executive directors. Photo by Gordon Kneale Brooke / Selby Pickle Factory / CC BY-SA 2.0, Wikimedia commons.