Greencore swallows M&S's sandwich supplier Uniq

Dublin-based Greencore is the UK's biggest sandwich maker with clients including Waitrose, Sainsbury's, Asda and the Co-op. It already supplies Marks & Spencer with cakes but is now set to add Uniq's 120m-a-year deal with the retailer, taking its total sales over the 1 billion mark.

Chief executive Patrick Coveney said the proposed takeover "broadens Greencore's commercial footprint and is perfectly aligned to our strategy".

"It represents an important milestone as we extend the scale and leadership positions of our group in the UK convenience market," he added. "I am very excited about bringing together the Greencore and Uniq teams to deliver on this opportunity."

The Irish firm expects annual cost savings of at least 10m through the elimination of duplicated overheads, and overlaps in the two supply chains.

It also hopes to gain "significant tax assets" that will shelter Uniq's profits from tax for the foreseeable future.

The sale has already been approved by pension fund Angel Street, which owns more than 90 per cent of Uniq since a deal to cancel out its 436m pension deficit, a legacy of its previous incarnation as dairy giant Unigate.

But it will still have to be approved by Greencore's shareholders at a meeting next month. The firm says it already has the support of major shareholders representing 37 per cent of the company and hopes to complete the deal in September.

The takeover will also be subject to regulatory approval, although Greencore is unlikely to face problems having already undergone the process recently during its foiled attempt to acquire Northern Foods.

Greencore is offering 96p-a-share for Uniq, a 62.7 per cent premium on its 1 April price when the company concluded its agreement with Angel Street.

Greencore plans to pay for the acquisition with a 70m rights issue and a new debt facility. It also announced plans to leave the Irish Stock Exchange in order to be admitted to the FTSE All Share Index, although it will remain based in Dublin.

Uniq's 1,900 workforce makes sandwiches from a site in Northampton, salads at Spalding and desserts at Minsterley in Shropshire and Evercreech, Somerset.

Greencore, which employs some 7,000 people and has 20 sites in the UK, Ireland and the United States, said the Uniq acquisition would bolster its scale in the food-to-go and chilled desserts categories.

Analyst Clive Black at Shore Capital said the increased business with M&S was "a welcome development for Greencore".But he said a key challenge would be dealing with the Minsterley dairy, which he described as the "problem child" of the business.

He added: "This transaction should allow Greencore to move on and with Uniq digested look forward to further buy & build opportunities down the line."