UK watchdog will decide by end of October whether to launch phase two investigation
It said on Monday that it is beginning a phase one assessment to determine whether or not a more detailed investigation of the proposed deal is required.
Greencore announced the takeover deal for Bakkavor back in April. In May, the terms of the transaction were agreed. Shareholders for both firms have already agreed to back the move.
The UK’s Competition and Markets Authority (CMA) said that it has sufficient information in relation to the anticipated acquisition by Greencore of Bakkavor to enable it to begin an investigation for the purposes of deciding whether to make a reference for a phase two investigation.
The deadline for the CMA to make its decision about whether to initiate a deeper probe is October 27.
The opening of the phase one investigation follows an invitation from the CMA to interested parties during the summer to submit comments regarding the impact that the transaction could have on competition in the UK.
“This announcement is as expected and the CMA process is normal course of business for a proposed transaction of this nature,” said a Greencore spokesperson.
Greencore and Bakkavor both include major retailers such as Tesco, Sainsbury, Marks & Spencer and Asda among their customers, but provide different food products to the chains. Last year, Greencore factories manufactured 748 million sandwiches and other food-to-go items, as well as 125 million ready-meals.
Greencore generates two-thirds of its revenue from food-to-go products such as sandwiches, sushi and salads, while Bakkavor also makes desserts, pizzas and bread.
Greencore currently generates virtually all its revenue in the UK, and the combined group including Bakkavor will have annual sales of about £4bn, almost all of it also delivered in the UK. The Irish company delivered revenue of £1.8bn last year compared with Bakkavor’s £2.3bn.
The deal will see Greencore shareholders owing around 56pc of the combined group and Bakkavor shareholders owning the other 44pc.
In 2008, Bakkavor owned about 11pc of Greencore, but sold the stake as the financial crisis hit. A potential tie-up between the pair has long been rumoured.
Greencore is targeting half of the projected £80m synergies from the takeover deal being achieved in the first year, 85pc by the second and all by the third year.
“In terms of synergies, we’re looking at at least £80m,” said Greencore chief executive Dalton Philips earlier this year.
“We’re very confident that we can do that,” he added. “This is a combined business with a £4bn sales base. The first step is to deliver the £80m and then probably re-group and see is there more opportunities. We haven’t put any revenue synergies into our models, so this is cost-driven, but there will in time be lots of other opportunities to go after.”
Greencore, known in a previous incarnation as Irish Sugar, will celebrate 100 years in business next year, while Mr Philips also previously confirmed that the company will retain its headquarters in Ireland.
We’re an Irish business,” said Mr Philips. “We’re an ambitious business. In time, we may look elsewhere for growth opportunities. Being headquartered in Ireland gives you that platform for future growth in other jurisdictions. I don’t see any reason why we would want to change where we are currently headquartered.”
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