Doubt over Northern Foods link-up to Greencore

THE PROPOSED merger between Greencore and Northern Foods has been thrown into question, following confirmation by Northern Foods that it has received an approach from a rival bidder.

Boparan Holdings Ltd, a company controlled by Yorkshire-based chilled food tycoon Ranjit Singh Boparan, confirmed yesterday it was at “a preliminary stage in evaluating a possible cash offer for the company”.

The company has requested information from Northern Foods to complete due diligence ahead of the merger. Under British takeover rules, bidders must be given equal access to financial information during an offer period.

Northern Foods’ share price climbed on the news, closing more than 4 per cent higher at 63 pence.

In a statement to the London Stock Exchange yesterday, Northern Foods said it had had a request for information from Boparan, but there was “no certainty that an offer will be made, nor as to the terms upon which any such offer may be made”.

According to some reports, Mr Boparan is planning to launch a £300 million (€352 million) bid for the company. The Greencore-Northern Foods merger is an all-share transaction.

Greencore’s share price fell yesterday on the back of the news, closing down 4.5 per cent at €1.27.

In a statement to the Irish stock exchange, Greencore said it “notes” the announcement, adding the board continued to believe the merger announced on November 17th last “represents a compelling opportunity for value creation for both Greencore and Northern Foods shareholders, through the creation of a business with real scale in the industry”.

Northern Foods and Greencore published their merger documents yesterday, which were distributed to shareholders. “Subject to receipt of all applicable regulatory clearances and the satisfaction or waiver of all other conditions to the merger, including shareholder and court approval, the merger is expected to be completed by the end of Q1 2011 or early Q2 2011,” the document said. Shareholder meetings to approve the merger will be held on January 31st next.

Ranjit Singh Boparan is the owner of the 2 Sisters Food Group, a supplier of chicken and prepared chicken products to retailers including Marks Spencer and Tesco. He is also behind the Harry Ramsden chip shop business. The British millionaire holds over 6 per cent of Northern Foods through his wholly owned company, Saerimner. Since the announcement of the proposed merger he has increased his stake from under 3 per cent to 6.6 per cent.

Yesterday’s announcement by Mr Boparan, which has been registered by the British takeover panel, is known as a rule 2.4 announcement, indicating a possible takeover of a company. Under rule 2.4 there is no time limit required to make an offer.

If Mr Boparan makes a rule 2.5 announcement, which indicates a firm intention to make an offer, he will have 28 days to make an offer. Under competition law, the target company is permitted to request the takeover panel to insist a rule 2.4 bidder either makes an offer or withdraws it by a specific deadline.