Greencore is in line for its biggest acquisition with its £258 million sterling (€427 million) recommended bid for the British consumer foods business Hazlewood Foods. When Hazlewood's £90 million sterling (€152 million) debt is taken into account, the net cost of the acquisition is €582 million, more than Greencore's own stock market value.
Greencore's rise to the top of the bidding for Hazlewood came as a surprise to some in the market, as until late on Thursday the French private equity group, Paribas, had been seen as the front runner. Greencore's offer of 113p sterling a share, however, was enough to get the backing of the Hazlewood board and sufficient to get acceptances in respect of over 31 per cent of Hazlewood shares. In addition, Greencore bought 16.6 per cent of Hazlewood in the market, giving it effective control over almost 48 per cent of the shares.
Greencore's decision to go ahead with a major acquisition in the UK consumer foods markets comes a day after Golden Vale pulled out of the £130 million acquisition of Prize Foods, a company with similar but not identical operations in consumer foods to Hazlewood.
The acquisition is the latest and by far the most significant part of Greencore's move to reposition itself as an added-value consumer foods group. It will mean that Greencore will become one of the leading players supplying ownbrand chilled pizza, sandwiches, quiches, recipe sauces and cakes and desserts for the major British multiples.
"This is a real step change, it's right on our chosen path and will provide good value for Greencore shareholders," said chief executive Mr David Dilger. But he added that while Hazlewood had a number of fine businesses with strong market shares, it also had a number of problem businesses which had to be dealt with, particularly the readymeals business.
Greencore has set itself a target of £120 million in asset disposals within 18 months from Hazlewood and the existing Greencore business. The concentration is going to be on the sauces, quiche, sandwiches, bakery and pizza business and it seems likely that most of the remaining Hazlewood business, which includes fish products, horticulture products, bottled water, packaging and the chilled meals operation, will be sold.
In the businesses that will be retained, the combined Greencore-Hazlewood will have a leading market position in the UK and prominent market positions in Germany and Holland. Those businesses that will be retained have benefited from heavy capital investment in the past few years in plants in Bristol, Sheffield, Manton Wood, Hull and in Holland.
In the year to March 2000, Hazlewood had sales of £759 million sterling and operating profits before exceptional items of £48.7 million - marginally ahead of the £47.8 million operating profits in 1999. In effect, Hazlewood's operating profits have been virtually static for the past three years and the situation has deteriorated in the half-year to the end of September, where operating profits fell from £21 million sterling to £13.1 million sterling.
Greencore's likely success in its bid for Hazlewood Foods comes almost a year after the Irish group bid £187 million sterling for Perkins Foods, a bid that was later withdrawn after disagreements over the future direction of the company. Since then, Greencore has spent €48 million on the Roberts Group, a British manufacturer of frozen savouries and desserts. Other major acquisitions are seen as unlikely until Greencore has rationalised and restructured Hazlewood and sold off the non-performing businesses.
