Dumped Greencore mulls improved deal for Northern Foods

24th Jan 2011 07:23

Irish foods group Greencore may be prepared to improve its offer for biscuits and pizza group Northern Foods after the agreed merger between the two was scuppered by Indian firm Boparan's £342m offer late Friday.In a statement Greencore said a combination with Northern Foods still represents a compelling opportunity for value creation for both Greencore and Northern Foods shareholders."However, the board recognises the importance attached by the Northern Foods board to the certainty of cash value in their decision to change their recommendation," it added.That has prompted speculation that it might both increase the numbers of shares and offer a cash sweetener in a bid to revive the merger. Under the original deal, Northern's shareholders would have received 0.4479 of a new Greencore share for each share they owned. Greencore was stunned on Friday after Northern Foods ditched it following Boparan's 73p per share bid, which followed a two-hour extension granted by Takeover Panel.Boparan, run by Ranjit Singh Boparan, owns the Harry Ramsden and Fishworks restaurant chains as well as the 2 Sisters Food Group and is a big supplier of chicken to Tesco and Marks & Spencer.Greencore issued a second statement on Monday, after the market closed, outlining how the £40m merger synergies it has previously pointed to would be achieved from a merger with Northern Foods. It said the synergies are expected to comprise about £15m from overhead cost savings, about £20m from purchasing and supply chain improvements and about £5m from financing and tax efficiencies. Overhead cost savings would be achieved by measures such as the creation of a single board, combining certain functions in areas such as finance and tax and eliminating overlapping roles within manufacturing units, Greencore said.Purchasing and supply chain efficiencies would result from the creation of a single purchase organisation, lower storage costs, sharing trucks and other measures.As well as the £45m in synergies, Greencore said it thinks the merger would provide the opportunity to achieve revenue synergies by leveraging "distribution channels, brands, product portfolios and research and development capability across the combined group."