Published: Tue, November 15, 2016
Economy | By Melissa Porter

Greencore expands United States operation with $750m Peacock Foods deal

Greencore expands United States operation with $750m Peacock Foods deal

Specifically, Greencore said the acquisition of Peacock Foods will provide it with a step change in scale in overall revenues, a presence in attractive growing categories and a national manufacturing footprint.

Irish-registered but London-listed Greencore had signalled an intention to expand in the United States where it already produces sandwiches, salads, sushi and deserts for customers including Starbucks and the 7-Eleven convenience store.

"The acquisition of Peacock will transform our USA business, strengthen our position in..."

Peacock has deep, long-standing relationships with consumer packaged goods (CPG) leaders including Tyson Foods, KraftHeinz and Dole.

The combined business "has the potential to transform Greencore's market and channel position in the USA and create a strong platform for long-term profitable growth", the British firm said.

The acquisition price is 10.4 times earnings, though this falls to 8.4 when potential synergy and tax benefits are counted in.

Commenting on the deal, Greencore's chief executive Patrick Coveney said the deal will transform the company's United States business, strengthen its position in high growth categories, broaden its channel and customer exposure, and add significant scale to its operations. News of the transaction, which Greencore executives called transformational, pushed the Dublin-based company's share price up more than 14% on November 14 in early trading on the London Stock Exchange.

The deal has compelling strategic rationale, with expected significantly enhanced earnings and targeted return ahead of cost of capital from first full year of ownership.

Peacock Foods ceo Tom Sampson was "thrilled" to be joining.

The rights issues to fund the purchase will offer shareholders nine new shares at 153p for every 13 they now hold. We have been particularly struck by the similarities in the way we run our business and our mutual long-term commitment to the U.S. convenience food market.

"In the United Kingdom, we have delivered substantial like-for-like growth against the backdrop of a challenging retail market and an uncertain economic environment and, in the USA, we now have a business that is primed to deliver sustainable, profitable growth".

"We are delighted to welcome the Peacock team into the Greencore Group". It generated revenue of around $1 billion in the year to September with adjusted pre-tax earnings of $72.1 million.

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