Greencore and Northern Foods to merge

17th Nov 2010 08:49

Irish ready made meals supplier Greencore and Goodfellas pizza and Fox's biscuits group Northern Foods have agreed a 50:50 merger that will save £40m a year.The new company will trade as Essenta Foods when the deal completes, expected during the second quarter of 2011. Over 30% of Greencore and almost 12% of Northern's shareholders have already backed the move.Northern's shareholders will get 0.4479 of a new Greencore share for every Northern Foods share they own.Greencore's chief executive Patrick Coveney will run the enlarged group, with Northern Foods finance boss Simon Herrick taking up the same role at Essenta.Northern chairman Anthony Hobson keeps his role and his counterpart at Greencore becomes his deputy."The investment case is underpinned by tangible cost synergies and the platform for further growth in the UK, Ireland and the US," said Coveney.About £15m of synergies are expected from overhead cost savings, £20m from purchasing and supply chain improvements, and around £5m from financing and tax efficiencies.At least half of these savings will be realised in the first 12 months after completion, up to 90% in the second year and the full amount in year three.There'll be a one-off cash cost of £45m, two-thirds of which will be incurred in the first 12 months after completion.