Rothschild switch casts doubt on Greencore's bid for Northern Foods

Shareholder concern is also mounting over whether part of the 40 million of synergies cited by the British food maker in its recommended takeover by Irish sandwich maker Greencore will be demanded as a rake-off by the new group's supermarket customers. It is said this could also weaken the rationale for the deal on the table.

One leading UK investor in Northern told Scotland on Sunday: "Rothschild were a retained adviser to Northern until three weeks ago. They would not now be involved with Boparan unless there was something definitely credible about his interest in derailing the merger with Greencore.

"Rothschild know the boards of both companies, and know the potential deal Boparan is considering.

"It definitely gives him more credibility, particularly when the Northern share price in the market is 22 per cent ahead of the value of the all-share Greencore price being offered."

Northern's shares closed on Friday at 59.75p. The 52-week high was 66.5p, while the shares hit a year low at 41.75p. The investor said the share price and Rothschild's involvement were twin drivers that might swing institutional support behind Boparan Holdings if it decides to bid rather than walk away before the deadline of this Friday imposed by the Takeover Panel.

The investor said there was a danger that the synergies identified by Northern and Greencore might spark pressure from the big supermarket customers for reduced prices from the new group, to be called Essenta.

"The synergies touted by Northern and Greencore are credible. But the M&S's and Tescos of this world might well say 'I want a slice of that'. Those synergies might then not in real terms all accrue to the new group," he said.

"Food manufacturers are not in a strong position in the value chain. They are at the mercy of both raw material prices and strong buyers, and I think the supermarkets might well say they want a piece of the cost-saving action at Essenta."