More on the Northern Foods and Greencore merger of equals, with analysts suggesting it may not be a done deal yet.
The terms of the deal mean Northern Food investors will 0.4479 of a new Greencore share for each Northern Food share, but at Northern's current price of 56.25p - up 11p - it is trading higher than the offer price. Traders said that suggested there was the hope of a counter bidder, with our old friends private equity mentioned as possible predators.
Earlier the companies said around 30% of Greencore shareholders and 12% of Northern Food investors were backing the offer, so clearly there could be room for manoeuvre. Charlie Mills at Credit Suisse said:
The proposed 50-50 merger with Greencore looks financially and commercially an excellent deal with significant synergies. [It] may well encourage third parties to look at Northern (remember it has extensive interests in industries dominated by private equity – notably Biscuits and Frozen Foods).
Mills also points out Northern's 10% dividend yield will go if the merger succeeds:
The group is indicating cover of 2-2.5 times, which would imply the yield will halve post merger.
And in response to my comment wondering what on earth the chosen name for the merged group means, one of their PRs has decided to explain it:
Essenta derives from Essentia, Latin for 'essence'. Essence means 'The most important feature, the most significant element or quality of something'. Essenta represents 'the essence of great food'.
