David Dilger has been criticised in the past for adopting what many thought was an overly cautious approach to acquisitions.
Yesterday's recommended €588 million (£462.75 million) bid for Hazlewood Foods will end that criticism. But Greencore's chief executive knows the jury will be out on the acquisition until it is clear Greencore has got to grips with the problem areas in the British consumer foods group.
That probably explains the cautious reaction in the market where Greencore closed just three cents higher on €2.83. Analysts in Dublin believe that if Greencore can get the synergies it has targeted from the combined Greencore-Hazlewood operations and can realise the £120 million (€152.5 million) in asset sales, Hazlewood will be a major earnings generator.
One analyst suggested that once this work was done, the remaining profitable businesses with sizeable market share could add 10 cents a share or more to Greencore's earnings. If that could be attained from Hazlewood, Greencore shares would warrant a rerating for their current low earnings multiples.
Before that happens a lot needs to be done at Hazlewood. Mr Dilger has not tried to understate the task that lies ahead in integrating the businesses, restructuring those bits that are retained and selling off the parts of Hazlewood that are performing poorly. Mr Dilger says this last group has disguised the excellent performance from the businesses he wants to retain. The market will want results - and quickly - from this restructuring and rationalisation. The enlarged Greencore will be a heavily indebted organisation and there was no demurral from the Greencore directors when it was suggested to them that interest charges after the acquisition would be covered three times or less by operating profits. Greencore has put in place a £645 million sterling (€1.07 billion) debt facility to cover the €436 million cost of Hazlewood, Hazlewood's own €151 million debt and its own debt, estimated at €171 million at the end of September.
That debt package has been structured to reflect cash-flow from the enlarged group and the £120 million disposal programme. The target is to reduce net debt as a proportion of earnings before income tax, depreciation and amortisation (EBITDA) to under 2.2 times and to increase EBITDA/interest multiple to over five times by 2003. Mr Dilger, an accountant by training, has a reputation as a rigid cost-cutter, talents he will need to reach those financial targets.
