Greencore may up bid for Northern Foods

CONVENIENCE foods group Greencore yesterday said it was weighing up its options amid speculation it may pitch in with a higher offer in the battle for control of Northern Foods.

Shares in Northern raced ahead by more than 17 per cent as the market digested the all-share offer made by food tycoon Ranjit Boparan after the markets closed on Friday.

But in a statement yesterday, Greencore said it continued to believe the original merger plans with Northern Foods - which would have created a new company called Essenta Foods - represented "a compelling opportunity for value creation" and the potential for substantial synergies.

Chicken magnate Boparan, who also owns the Harry Ramsden fish shop chain, has offered 73p per share, valuing the Leeds-based maker of Goodfella's pizza and Fox's biscuits at about 342 million.

Boparan secured backing for his bid from Northern Foods after tense last-minute negotiations with the board which then withdrew its earlier recommendation for an all-share offer from Aunt Bessies frozen food range maker Greencore.

Boparan's bid was pitched at a near 70 per cent premium to Greencore's offer of 0.4479 shares for each Northern share, worth 43p per share at current prices.

Irish-based Greencore confirmed it was considering its options and would seek the views of both sets of shareholders before deciding its next move. It also hinted at the possibility of adding a cash element to its offer saying it "recognises the importance attached by the Northern Foods board to the certainty of cash value in their decision to change their recommendation".

Fund manager Martin Brown, who runs the Ignis UK Equity Income trust which owns shares in Northern Foods, argued the company is worth significantly more than Boparan's bid and that the Greencore deal may be better for shareholders in the long term. "Whilst we understand that the certainty of Boparan's all-cash offer is attractive, the benefits of a merger with Greencore would have been substantial," he said.

"The 40m of cost savings the management of Greencore think they can extract from a merged company is a very conservative figure, with our analysis suggesting it could be closer to double that amount."

He said fair value for the shares was closer to 90p.

Shares in Northern closed up 11p at 74p.