A reaction to the failed Northern Foods quest - or a measured, strategic move?

ANALYSIS:Greencore had to make its move this time, or again risk losing out to another bidder

GREENCORE CHIEF executive Patrick Coveney is nothing if not proactive. The decision to swoop for Uniq just four months after Greencore officially withdrew from the race for Northern Foods is a bold one.

Whether it is an impulsive reaction to the failure of the Northern Foods merger, or a measured strategic decision taken for the future good of the company, is the central question.

Timing had something to do with it, with Uniq coming on the market within weeks of Greencore abandoning its Northern Foods quest.

Coveney’s assertion that the bidding process was “competitive” can be read not only as a justification for the price paid.

It also implies that Greencore had to make its move or again risk losing out to another bidder.

The downward trajectory of Greencore’s share price – which had been trading as low as 90 cent in recent weeks – may also have increased pressure to make a move.

However, Uniq is not a straightforward company. Ninety per cent owned by its pension trustees, it has had a troubled history since it evolved from Unigate.

While its Food to Go division is performing well – benefiting in particular from Marks Spencer’s decision last year to reduce its sandwich suppliers from three to two – the key to the success of this deal will be how Greencore deals with the desserts business.

This division is a not insignificant part of the business, representing almost 50 per cent of turnover, but, historically, it has been loss-making. Management has instigated a restructuring, and Greencore says it is fully on board in terms of the plans to streamline and reduce the number of products it makes.

Ensuring it instigates proposed changes will be crucial to the success of the acquisition.

The other main effect of the sale is the transfer of Greencore’s main listing to the FTSE, which is likely to require the company to drop its Iseq listing.

Coveney said yesterday that Greencore needed to operate in the “most appropriate capital market”.

The company will still be headquartered in Ireland for tax purposes and all of its corporate management team will remain in Ireland.

The change will have little material impact – only 60 of Greencore’s 7,000-strong workforce are located here.

Whether the Uniq deal will preclude Greencore from being considered a takeover target is another matter.

Private equity firm Doughty Hanson was rumoured to be interested in Greencore. Coveney refused to be drawn on the matter yesterday.

With the takeover due to be completed by the end of September, shareholders will be mulling the proposed rights issue, though the company is now overwhelmingly controlled by institutional investors.

Still smarting from the failed Northern Foods quest, Greencore’s shareholders are more than aware Coveney’s first gamble ended in disappointment; whether his second one pays off remains to be seen.