Glenboden M & A Originations

Greencore emerging as acquisition candidate in convenience foods

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Origination Status strategic co-operation agreement announced, February 2008
Asset new range under Colman's, Knorr and Bertolli brands
Sector convenience food, i.e. chilled ready meals and snacks
Buyer Unilever (UK /Holland), multinational FMCG group (IP provider)
Seller Greencore (Ireland), leading European convenience foods supplier (producer and distributor)
NBs Greencore is a rumoured acquisition target for Bakkavor
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Glenboden has been predicting that the big branded players will one day turn to convenience foods, once margins and brand equity are strong enough in that space. The market continues to grow and evolve; recent activity surrounding Greencore suggests that it might enter the radar screen of Unilever, or another big group like Bakkavor, in the not too distant future, especially after its tough year in 2007.

There’s a lot of potential in convenience foods. Look at Harry’s Foods in the US, a small batch producer of gourmet meals supplying both foodservice and branded retail, that has grown by an annualized 30% for as long as a decade. A year ago, we reviewed the its pending sale, and suggested that Campbell Soups might buy it, to expand their ‘meals’ portfolio from basic ambient to premium chilled. Unfortunately Harry’s was bought by a classic foodservice provider instead, Basic American Foods. However, we believe it’s only a question of time before such a player is acquired, as a breakthrough deal, by one of the branded majors.

Perhaps in anticipation of this, Unilever is to co-operate with Greencore over a new ready meals range in the UK, where the latter will be the producer and distributor, while the former will provide the marketing and the brands – Colman’s, Knorr and Bertolli. These are absolutely core brands for Unilever; we believe this is about more than just stretching the intellectual property to gain a bit more margin. If the project is successful, then Unilever will treat the category as a strategic one; then you have a clear path to their acquisition of Greencore.

The plot thickens. There’s an Icelandic company called Bakkavor, which is the UK’s largest producer of ‘fresh prepared foods and produce’, with a significant international business and global ambitions. It’s one of those public companies that has grown like crazy through acquisitions; it’s sales revenue in 2007, at 1,5 bln GBP, was 10 times as big as three years earlier. For illustrative purposes, Bakkover in January 2008 alone made two significant acquisitions, one in California and the other in China.

Rumour has it that Bakkavor wants to acquire Greencore, and to consolidate its activities with that of its subsidiary Geest, which is the UK’s biggest supplier of fresh produce. That’s likely to be true. Greencore, originally an ingredients producer in Ireland, has evolved since its privatization in 1991 to become a leading chilled ready meals and snacks producer in the UK, with significant businesses also in Holland, Germany and Ireland. It claims to be the largest producer of packaged sandwiches in the world. Right now it’s looking vulnerable as a takeover candidate, after a tough year in 2007.

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