Northern Foods shares climbed more than 16% this morning on the back of Friday's post-close announcement of an agreed bid from Ranjit Boparan.
The £342m cash bid trumped an offer from Greencore, but the Irish firm is still considering its options, perhaps adding a cash element to its earlier offer.
Warren Ackerman of Evolution Securities has suggested that the Greencore/Northern tie-up would provide long-term value, but that the lure of cash may win the day:
The industrial logic of Greencore/NFDS tie up appears to us to be higher than that of a NFDS/2 Sisters [Boparan] combination given the significant category overlap between the former which would likely lead to significant value creation over time through meaningful cost savings and revenue synergies.We estimate that Greencore could take the net debt/EBITDA of Essenta to 3.1x(from 2.3x)and raise c£120m which would equate to 25p cash per Northern share. If Greencore were to add 25p+ cash to the existing merger terms, we think the offer should be seriously considered by shareholders.
Northern Foods shares were up 16.3%, or by 10.25p, to 73p.
