Sandwich maker Greencore and chilled foods specialist Bakkavor have struck a deal to create a food giant which will have over £4bn in combined revenues.
Greencore announced on Wednesday that it had reached an agreement in principle with Bakkavovor for an all share offer to be satisfied by a mix of shares and cash.
The 200p per share deal would value Bakkavor at £1.2bn on a fully diluted basis, and represent a 33% premium to Bakkavor’s share price of 151p as of the close 13th March when Greencore first made a move.
Today’s agreement follows a couple of earlier offers by Greencore that Bakkavor said undervalued them.
Bakkavor shares were 6% higher at 189p at the time of writing on Wednesday.
The deal has clear benefits. The newly combined entity would have a much bigger coverage of the convenience food market, and merging their supply chains will produce efficiencies across the group.
Greencore’s strength in sandwiches will be complemented by a broad range of new products within the Bakkavor fold, including pizzas, soups, and salads.
The tie-up will also deepen Greencore’s geographical reach with additional exposure to the US and China.
Although the offer is exciting from an M&A perspective, it further highlights the vulnerabilities of UK-listed companies to takeover approaches due to their low valuation.