Greencore and Northern Foods to merge

Wednesday 17 November 2010 17.28
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Greencore - Northern Foods merger news sends shares higher
Greencore - Northern Foods merger news sends shares higher
Patrick Coveney - to be new CEO of merged business
Patrick Coveney - to be new CEO of merged business

Shares in Greencore jumped almost 29% in Dublin today after it announced a merger with Northern Foods.

The new group will be called Essenta Foods, and Greencore and Northern Foods shareholders will each hold approximately 50% of the enlarged share capital. The deal will see the merging of such brands as Fox's biscuits and Goodfella's pizzas.

The two companies say the merger offers substantial benefits for shareholders, customers and employees. It also has the potential to save about €40m a year. These savings are expected to be realised within three years.

Greencore's CEO Patrick Coveney will become the new chief executive of Essenta and Northern Foods' CFO Simon Herrick will be the chief financial officer. The merger is expected to be completed during the second quarter of next year.

The new company would trade on the main market of the London Stock Exchange. Greencore said it intended to seek a cancellation of its Dublin listing with effect from the date of completion of the merger.

The deal is still subject to clearance from various bodies, including the Irish Competition Authority and the two companies' shareholders.

'Essenta Food presents a compelling opportunity for all stakeholders,' commented Greencore boss Patrick Coveney.

'It creates a substantial chilled prepared food company in fast growing categories in the UK, which is enhanced by strong branded positions in biscuits and frozen food. The investment case is underpinned by tangible cost synergies and the platform for further growth in the UK, Ireland and the US,' he said.

'The time is right for both companies to build a real 'better than both' business and I look forward to bringing together the teams from Greencore and Northern Foods to deliver on this opportunity,' he added.

Greencore annual sales up almost 7%

Greencore also published its annual results today, which showed that group sales last year rose by 6.9% to €856m. Group operating profit was €59.7m, an increase of 17.6%. The figures were helped by a consumer trend of increased 'at home' and 'on the go' ready food consumption.

The company said its pre-tax profits for the year to the end of September came in at €30.32m, compared to a loss of €23.38m the previous year. The company is recommending a final dividend of 4.5 cent per share.

Greencore said its convenience foods division had a very strong year benefiting from overall market growth and positive consumer trends as people are continuing to eat more at home. Divisional sales from continuing operations were up 10.7% to €784.5m, while operating profit rose by 21% to €54.1m.

During the year the company sold off its malt business and as a result its ingredients and property division now represents less than 10% of its overall group activity.

'We have made enormous progress in reshaping our group into a focused, growing convenience food business this year, commented group CEO Patrick Coveney.

'This is reflected in the strong sales, margin and profit growth in the results of our continuing business announced today. Furthermore, an effective disposal programme has dramatically reduced group net debt and provides the basis for further development in convenience food,' he added.

Shares in Greencore jumped 29% to close at €1.34 in Dublin.