Greencore’s proposal wasn’t lacking in appeal. The deal offered Bakkavor shareholders 85p per share in cash, 0.523 Greencore shares per Bakkavor share and the right to retain a 4.8p final dividend. Yet, Bakkavor’s board swiftly and decisively turned down the proposal – twice.
Why the firm resistance? Bakkavor’s leadership argues the offer ‘significantly undervalued’ the company, but is the rejection part of a bigger negotiation strategy? With Icelandic cofounders Agust and Lydur Gudmundsson controlling 49% of the company and Longrange Capital holding a further 20%, any deal must be compelling enough to convince these heavyweight stakeholders.
The battle for control of the food-to-go marketGetty Images (Image/Getty Images)At the heart of this standoff is control over the UK’s ready-to-eat food market. London-based Bakkavor dominates fresh-prepared foods, supplying a diverse range of chilled meals, sandwiches, pizzas, soups and sauces. Greencore, meanwhile, specialises in sandwiches, wraps and sushi – products that have seen an explosion in demand as supermarket meal deals and food-to-go purchases rise. A merger would create a powerhouse with combined revenues of nearly £4 billion, an unmatched product portfolio and increased production efficiency.
Yet, from a manufacturing standpoint, the deal brings complications. Bakkavor’s operations span the UK, US and China, with factories tailored to a diverse range of food categories. Integrating such a vast network with Greencore’s predominantly UK-based sandwich and salad-focused facilities could be complex, leading to potential supply chain inefficiencies rather than the cost savings Greencore is touting.
Also read → UK introduces Natasha’s Law to protect people with food allergiesGreencore’s growth dilemmaWhile Greencore presents the merger as an opportunity to create a more competitive business, it is already a dominant player in the UK sandwich market, operating multiple manufacturing sites and distribution centres across the country. However, the bid also highlights its own strategic challenges.
The Dublin-based company has struggled with a revenue decline of 5.6% in the past year, partly due to divestments. In contrast, Bakkavor has maintained growth, expanding its UK market share and successfully navigating supply chain disruptions.
Absorbing Bakkavor would be a gamechanger for Greencore – providing access to a broader product range and international expansion opportunities. However, Bakkavor’s leadership seems to view Greencore’s approach less as an opportunity and more as a lifeline for its smaller competitor.
The risk of saying noGetty Images (Image/Getty Images)While Bakkavor’s rejection signals confidence, refusing Greencore’s bid is not without risks. The company has had its share of challenges, including a labour dispute at its Spalding site in 2023, which caused disruptions in supermarket supply chains. The food industry remains volatile, with shifting consumer preferences and cost pressures from inflation.
By rejecting the deal, Bakkavor is betting on its own ability to maintain market leadership without external consolidation. However, if Greencore or another potential suitor comes back with an improved offer, it could force Bakkavor’s board to reconsider.
A potential third bid or a different rival?Greencore has stated it is still evaluating strategic opportunities, keeping the door open for another attempt. However, unless it significantly improves its offer or secures backing from Bakkavor’s major shareholders, another rejection is likely.
There is also the possibility that another food manufacturer – perhaps one with a stronger international footprint – could see Bakkavor’s rebuff of Greencore as an opportunity to make a competing bid. With its scale, profitability and unique position in the chilled convenience food market, Bakkavor remains an attractive acquisition target.
Also read → Bakkavor publishes updated Environmentally Sustainable Sourcing policy outlining cage-free egg commitmentFor now, the battle over on-the-go sandwiches, salads and desserts rages on, with Bakkavor standing firm against Greencore’s advances. Whether this is a power move to extract a better offer or a strategic long-term stand remains to be seen – but the outcome will shape the future of the UK’s food-to-go market.