Greencore Seals £1.2Bn Deal For Bakkavor To Cook Up £4Bn Food Giant

Two Icelandic brothers, famously dubbed “business Vikings”, are set to cash in millions after their ready meals business, Bakkavor, agreed to a £1.2 billion takeover by rival food group Greencore.

Image: Greencore

Greencore – the UK’s largest sandwich maker – confirmed it had struck a deal to acquire Bakkavor in a move that will create a new £4bn convenience food giant. The tie-up will combine two of the UK’s leading chilled food manufacturers, offering a broad range of products to major retailers.

The takeover comes after Greencore made two earlier approaches for Bakkavor, both of which were rejected as the company felt they undervalued the business. Under the terms of the agreed cash-and-share deal, Bakkavor shareholders will receive 85p in cash per share and 0.6 Greencore shares for each Bakkavor share they own.

The agreement values Bakkavor at £1.2bn and represents a premium of 32.5% to Bakkavor’s share price on 13 March, prior to the start of the offer period. Greencore shareholders would own approximately 56% of the combined group, while Bakkavor investors would hold the remaining 44%.

Founded in 1986 by Icelandic brothers Lýdur and Ágúst Gudmundsson, Bakkavor manufactures chilled ready meals, dips, salads and desserts for all the major UK supermarkets, including Tesco, Sainsbury’s, Marks & Spencer, Waitrose and Asda. Around 85% of Bakkavor’s revenues are generated in the UK. The business produces dips and hummus for Tesco and premium “Gastropub” ready meals and high-protein salads for Marks & Spencer.

Greencore employs around 13,300 staff and operates 14 factories across the UK, supplying prepared foods, sushi and chilled ready meals to leading British retailers.

Together, the companies said the deal would create a “UK convenience food business with a combined revenue of £4bn, offering a diverse range of products”.

The Gudmundsson brothers, often referred to as “the Bakka brothers”, are known for their aggressive business approach and were part of a group of Icelandic financiers labelled “business Vikings” during the early 2000s. The term was used to describe the wave of Icelandic investors who snapped up European businesses, often using heavy borrowing, ahead of the 2008 financial crash which badly affected Iceland’s economy.

Lýdur and Ágúst Gudmundsson held executive roles at Bakkavor from its inception until 2022 and still sit on the company’s board as non-independent non-executive directors. They retain a controlling stake of just over 50%.

Under the deal, the brothers are expected to join the board of the combined group as non-executive directors, leaving them in line for a significant payday.

Bakkavor’s shareholders will vote on the proposed takeover at their annual meeting in May.

Bakkavor floated on the London Stock Exchange in 2017, having previously delayed its plans due to market volatility.

However, the Gudmundsson family’s business empire has not been without controversy. Lýdur Gudmundsson was found guilty of financial crime in Iceland in relation to investments in the failed Icelandic bank Kaupthing during the 2008 financial crisis.

Source: The Guardian