Northern Foods: to merge with Greencore Group

Leeds / UK. (nf) The Boards of Greencore Group and Northern Foods PLC, two of the leading food manufacturers in the UK and Ireland, are pleased to announce that they have reached agreement on the terms of a recommended merger of equals to create Essenta Foods. If the Merger becomes effective, Northern Foods Shareholders will receive 0,4479 of a New Greencore Share for every Northern Foods Share held by them. On this basis, Greencore Shareholders and Northern Foods Shareholders will each hold approximately 50 percent of the enlarged, fully diluted, share capital of the Combined Group. Greencore will be renamed Essenta Foods upon the Merger completing.

The Boards of Greencore and Northern Foods believe that the Merger is a compelling prospect for both companies, creating a business which offers substantial benefits for shareholders, customers and employees. The Boards of Greencore and Northern Foods believe that the Merger will:

• combine two highly complementary businesses to create an operator with an enhanced presence in the attractive private label convenience foods category with significant branded positions in Biscuits (Fox´s) and Frozen Pizzas (Goodfella´s);
• provide the ability to drive cost efficiencies and combine complementary customer bases and provide opportunities to deepen relationships with key customers; and
• provide a stronger credit profile, which will help to ensure greater financial and strategic flexibility in future.

Synergies

The Boards of Greencore and Northern Foods believe that the Combined Group will be able to achieve annual cost synergies of approximately 40 million GBP. These synergies are expected to comprise approximately 15 million GBP from overhead cost savings, approximately 20 million GBP from purchasing and supply chain improvements and approximately five million GBP from financing and tax efficiencies.

The Boards of Greencore and Northern Foods believe that at least half of these synergies will be realised in the first twelve months after completion of the Merger, rising to approximately 90 percent in the second year after completion of the Merger, with the full amount of synergies being realised in the third year after completion of the Merger. It is expected that realisation of these synergies will incur one-off cash costs of approximately 45 million GBP, of which approximately two-thirds would be incurred in the first twelve months after completion of the Merger, with the remainder being incurred in the following year.

In addition to these cost synergies, the Boards of Greencore and Northern Foods believe that the Merger will provide an opportunity to achieve certain revenue synergies through leveraging distribution channels, brands, product portfolios and research and development capability across the Combined Group.

Structure and expected timing of the Merger

The Merger, which will be effected under the European cross-border mergers regime, will be carried out as a «merger by absorption» for the purposes of the relevant UK Cross-Border Mergers Regulations and a «merger by acquisition» for the purposes of the relevant Irish Cross-Border Mergers Regulations. It will result in Northern Foods´ assets and liabilities being transferred to Greencore by order of the Irish High Court and Northern Foods Shareholders receiving New Greencore Shares in consideration for this transfer. The Boards of Greencore and Northern Foods reserve the right (with the consent of the UK Panel and/or the Irish Panel, as the case may be) to implement the Merger by means of an alternate transaction structure if considered necessary or desirable.

Subject to receipt of all applicable regulatory clearances and the satisfaction or waiver of all other Conditions to the Merger, it is expected that the Merger will be completed during the second quarter of 2011.

Creation of Essenta Foods

Following completion of the Merger, Greencore will be renamed Essenta Foods and will remain domiciled and tax resident in Ireland, with its registered and corporate head office in Dublin and a UK operational centre in Yorkshire. On completion of the Merger, Essenta Foods will be admitted to the premium segment of the Official List of the UKLA and its shares (comprising the Existing Greencore Shares and New Greencore Shares) will be traded on the London Stock Exchange´s main market for listed securities and quoted in pounds sterling.

Essenta Foods will not retain Greencore´s existing listing on the Irish Stock Exchange, and accordingly Greencore intends to seek cancellation of this listing with effect from the date of completion of the Merger. In due course, it is expected that Essenta Foods will consider applying for a secondary listing on the Irish Stock Exchange in accordance with Chapter 11 of the Irish Listing Rules.

Following discussions with FTSE, it is anticipated that Essenta Foods will be included in the FTSE UK Index Series with immediate effect on completion of the Merger. It is anticipated that Essenta Foods will have a March financial year end and will report on the basis of a 52/53 week financial year in pounds sterling.

Board of Directors

The Board of Directors of Essenta Foods will be drawn equally from the boards of Greencore and Northern Foods. Anthony Hobson, currently Chairman of Northern Foods, will become Chairman of Essenta Foods and Ned Sullivan, currently Chairman of Greencore, will become Deputy Chairman.

Patrick Coveney, currently Chief Executive Officer of Greencore, will become Chief Executive Officer of Essenta Foods and Simon Herrick, currently Chief Financial Officer of Northern Foods, will become Chief Financial Officer.

There will be an additional six non-executive directors (all of whom are considered independent for the purposes of the UK Corporate Governance Code) drawn equally from the Boards of Northern Foods and Greencore: Tony Illsley; Gary Kennedy; Patrick McCann; David Nish; David Simons; and Sandra Turner.

Commenting on the Merger, Anthony Hobson, Chairman of Northern Foods, said:

«The proposed merger is a great opportunity to develop fully the potential of both companies. It will create a sustainable, top tier organisation which will be capable of delivering best in class food products and innovative solutions to its customers. We have a great executive leadership team whose priority is to ensure that we work closely with our employees, our customers and our shareholders to integrate effectively and capture the huge opportunities available».

Commenting on the Merger, Patrick Coveney, CEO of Greencore, said:

«Essenta Foods presents a compelling opportunity for all stakeholders. It creates a substantial chilled prepared food company in fast growing categories in the UK which is enhanced by strong branded positions in biscuits and frozen food. The investment case is underpinned by tangible cost synergies and the platform for further growth in the UK, Ireland and the US. The time is right for both companies to build a real ‘better than both’ business and I look forward to bringing together the teams from Greencore and Northern Foods to deliver on this opportunity».

Info: «Proposed Merger Between Greencore And Northern Foods To Create Essenta Foods» – complete press release (PDF; 51 pages; 209 KB).