Greencore Group PLC (GNC.L) has announced its agreement to acquire rival Bakkavor Group PLC (BAKK.L) in a deal valued at approximately £1.2 billion ($1.55 billion).
This acquisition will create a leading convenience foods company in the UK, combining the strengths of both firms to drive growth and efficiency in the market, Reuters reported.
Under the terms of the agreement, Greencore will acquire Bakkavor for 200 pence per share in a cash-and-stock transaction. This offer represents a nearly 6% premium over Greencore’s previously rejected bid of 189 pence per share. As part of the deal, Bakkavor shareholders will receive 85 pence in cash and 0.604 Greencore shares for each Bakkavor share held.
Additionally, Bakkavor shareholders may be entitled to a contingent value right if the company disposes of its U.S. business before June 30, 2026. The transaction has been unanimously recommended by both companies’ boards, with Bakkavor founders Agust and Lydur Gudmundsson set to join the board of the newly combined entity as non-executive directors.
The merger will create a convenience food powerhouse with projected annual sales of approximately £4 billion. Greencore, a leading supplier of pre-packaged food to major UK supermarkets, will leverage the strengths of Bakkavor, which operates across the UK, China, and the U.S.
Greencore has seen strong demand for its pre-packaged food products in recent years. However, increased payroll and employment costs have presented challenges. Meanwhile, Bakkavor has been restructuring its U.S. operations after experiencing cost overruns and weaker demand in the region.
Analysts at Jefferies expressed optimism about the deal, stating, “We are encouraged that a route forward has been found in relatively short order and are increasingly warming to the value of a Greencore/Bakkavor combination.”
The combined company will benefit from substantial synergies, although specific details are yet to be disclosed. The merger will bring together Greencore’s 13,300 employees and 14 manufacturing facilities in the UK with Bakkavor’s 17,200 employees and 41 sites across its operational markets.
With Greencore shareholders expected to own 56% of the new entity and Bakkavor shareholders 44%, the deal underscores Greencore’s commitment to expanding its market position and enhancing efficiencies in the convenience food sector.
While the deal is expected to drive significant operational efficiencies, concerns have been raised about potential job losses. Eamon O’Hearn, national officer at the GMB trade union, commented, “Companies ‘assessing synergies’ is often management speak for cost-cutting. The UK food and drink industry needs more capacity, not less. GMB is calling for a commitment to no factory closures and no job losses.”
Following the announcement, shares in Bakkavor rose by 7%, while Greencore’s stock saw a modest increase of 0.5%, reflecting investor confidence in the value of the transaction.
