Convenience food maker Greencore has agreed a €1.44bn deal with Bakkavor Group to takeover the British firm.

In a statement, Greencore said the boards of both companies had reached an agreement in principle on the key financial terms of a possible cash and share offer for Greencore to acquire the entire issued and to be issued share capital of Bakkavor.

The deal would created "a leading UK convenience food business" with a combined revenue of about £4bn (€4.8bn).

The companies "see compelling strategic, commercial and financial rationale" for the deal and believe an acquisition would provide "a highly compelling value creation opportunity for stakeholders in both Bakkavor and Greencore."

They said the combined group would have enhanced innovation, supply chain and operations capabilities as well as the potential to benefit from economies of scale in relation to infrastructure investment, sustainability and automation.

"Shareholders of both Bakkavor and Greencore would benefit from the significantly enlarged market capitalisation and ongoing liquidity as a result of the transaction," they added, and both boards expect substantial synergies to arise from the deal.

Other terms and conditions are still to be agreed, and any potential acquisition would be subject to regulatory clearance and the completion of satisfactory due diligence by both parties.

Bakkavor has indicated to Greencore that it would be minded to unanimously recommend the deal on the agreed financial terms to its shareholders.

Under the terms of the offer, Bakkavor shareholders would receive 85 pence and 0.604 Greencore shares for each Bakkavor share they own.

Based on Greencore's closing share price on 13 March, the agreement implies a value of 200 pence per Bakkavor share, valuing the company at £1.2bn.

The valuation represents a premium of 32.5% on Bakkavor's closing share price of 151 pence on 13 March, the day prior to the commencement of the offer period, and 36.6% on Bakkavor's volume-weighted average closing share price of 146 pence in the six months prior.

If the deal is completed, Greencore shareholders would own approximately 56% of the combined company, and Bakkavor shareholders would own the remaining 44%.

Shares in Dublin-headquartered Greencore fell 1.8% at opening of trade in London this morning but have partially recovered since then.

Bakkavor shareholders will also be remunerated if its US business is sold within 12 months of the deal being completed.

Greencore has projected it will make a full-year adjusted operating profit of £112m to £115m in 2025.

The company reported lower revenue (£1.8bn) in 2024 as adjusted operating profit increased from £76.3m to £97.5m. Bakkavor reported 2024 revenue of close to £2.3bn and adjusted operating profit of £113.6m.

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