Northern and Greencore agree merger

Marion Dakers
FOOD retailers Greencore and Northern Foods revealed plans to merge yesterday, in a deal that will produce one of the biggest chilled food players in the UK.

The firms, responsible for Goodfella’s pizzas, Fox’s biscuits and the Weight Watchers range, will be rebranded Essenta once the proposed tie-up is complete in March 2011.

Management said yesterday the new business, structured as a merger of equals, will float as part of the FTSE 250 index, meaning Greencore will de-list from the Dublin exchange to meet London trading requirements. The company, which will have a combined revenue of £1.7bn, will be tax-domiciled in Ireland with an operational base in Yorkshire.

Under the terms of the deal, Northern Foods shareholders will receive 0.4479 of a new Greencore share for each Northern Foods share held.

“We are creating a food business of scale, with a balanced portfolio of products and customers that don’t overlap,” said new financial officer Simon Herrick, who joins from Northern. “It gives us fantastic market conditions. The debt funding that is available to us is frankly embarrassing, although the company will be focused on adapting to the merger for the next year.”

The deal needs approval from shareholders on both sides. Around 30 per cent of Greencore investors and 12 per cent at Northern, including GAM International and Odey Asset Management, have backed the merger.

Shares in both firms soared yesterday leading to speculation of a counter-bid. “Both companies are now in play,” Clive Black from Shore Capital said.

THE Irish food group has hired a veritable army of advisers to lend a hand with the merger.

Barclays Capital is acting as financial adviser, joint broker and joint sponsor, with Mark Todd and Jon Bathard-Smith heading the team.

Yesterday’s announcement was the first public glimpse of Todd since he joined from Citigroup in July 2009. The Queens College, Cambridge graduate has worked with Imperial Tobacco during its acquisition of Altadis, Tata Motors as it bought Jaguar, as well as buying and later selling Somerfield during his ten years at Citi.

Joint broker Investec has worked with Greencore for a number of years, with head of investment banking David Currie still heavily involved. Leading on this occasion is Chris Baird, who joined from Dresdner Kleinwort in 2009.

IBI Corporate Finance and Goodbody Stockbrokers, both based in Ireland, are acting as joint sponsor and joint broker respectively.

Magic circle firm Slaughter & May is advising on the legal side, with partners John Panichola and Jonathan Marks leading a six-strong team.

Panichola’s recent work includes advising Ocado on its initial public offering, while Marks aided GlaxoSmithKline’s £900m pensions buy-in with Prudential.

LEEDS-based Northern Foods has taken on UBS to act as financial adviser and broker, with Herbert Smith providing legal backing.

UBS has looked after Northern for more than eight years, with head of investment banking Hew Glyn Davies taking the lead. Davies also advises Sainsbury’s, construction firm CRH and Bank of Ireland, which completed a €1.7bn rights issue in June.

Craig Calvert acted as broker, adding to a list of clients that includes grocer Ocado and trader IG Group.

Hebert Smith partners Gillian Fairfield and Gareth Roberts provided legal advice. Fairfield specialises in corporate finance, with a specialism in mergers and takeovers.

She recently advised Rothschild during Centrica’s hostile takevoer, and Arriva when Deutsche Bahn offered a £1.6bn buy-out.

Gareth Roberts has worked with BAA during its £15.6bn takeover by Spanish group Ferrovial and when the firm established a £800m property holding fund.

The corporate partner has also given advice to Virgin Mobile on its £1.17bn takeover by NTL, AOL Time Warner during its attempts to poach EMI and brewer Foster’s Group as it sold its beer brand to Scottish & Newcastle.