Fox's biscuit firm in tie-up with biggest sandwich maker in UK

Northern Foods, the company behind Fox's biscuits and Goodfella's pizza, has unveiled plans to merge with the biggest sandwich maker in the UK, creating a group with annual sales of £1.7 billion.

Leeds-based Northern, which also includes Matthew Walker Christmas puddings in its product portfolio, hopes to complete the tie-up with Irish chilled foods firm Greencore by the end of June.

Bringing the two businesses together under the name Essenta is expected to save 40 million a year in costs, through better buying power, smaller tax bills and cost cutting.

Any redundancies are likely to be modest as the combined company hopes to safeguard jobs through stronger growth prospects.

Northern has 14 sites in the UK and employs some 9,000 people, while Greencore has about 7,000 staff and 17 manufacturing facilities, including a large sandwich-making site at Manton Wood, Worksop.

Shares in both Northern and Greencore made strong gains following news of the tie-up, which requires shareholder approval.

Analysts at Panmure Gordon said the merger made sense because it took a player out of the chilled convenience food market where suppliers have struggled to get supermarket customers to pay them enough to make a sensible profit.

The news helped push shares in Northern to a level not seen since May. If approved by investors, who would end up with roughly equal ownership of the new company, Essenta would have all the main supermarkets in the UK as its customers.

It would have a strong position in the growing sandwiches and chilled ready meals markets, which have grown by 9.8 per cent and 7.7 per cent respectively in the past year.

The merger will see Greencore boss Patrick Coveney become chief executive of Essenta while Northern's chairman Anthony Hobson will take the role of chairman. No announcement has been made about whether there will be a role for Northern chief executive Stefan Barden.

The new company will be based in Dublin with its UK operational centre in Yorkshire.

Coveney said: "Essenta Foods creates a substantial chilled prepared food company in fast-growing categories in the UK which is enhanced by strong branded positions in biscuits and frozen food.

"The time is right for both companies to build a real 'better than both' business."

Northern is one of the biggest suppliers of branded and own label products in the UK. As well as Goodfella's and Fox's it makes pies, sandwiches, salads, puddings and ready meals.

Greencore makes own label sandwiches for some of the biggest supermarkets in the UK and manufactures WeightWatchers products under licence. The company is based in Ireland but the majority of its staff are in the UK.