Greencore Buys Peacocks in Election Wake
Sandwich company Greencore has purchased Peacocks Foods, in a move that was delayed until after the US election results.
The deal of nearly £600 million was deliberately not revealed until Trump was named as the new president elect.
Peacocks are best known as the makers of Kraft Lunchables. They also make lines such as the Jimmy Dean biscuits. The deal had apparently been underway for several months. However, Greencore made the decision not to announce the deal until polling day had been and gone.
"We had to take stock last week and see whether the timing was going to suffer any impact from the results of the presidential election," said Patrick Coveney. "The view we took was that it was a good deal regardless of the outcome."
This is the biggest deal in the history of Greencore’s dealings, and so it is certainly a huge move forward for the Anglo-Irish food company. It’s unclear whether there will be any new food jobs on this side of the business as a result of the acquisition.
"Through our new customer relationships we will have much greater access and scale in the grocery channel in America," said Mr Coveney. "Peacock does some chilled food, but wouldn’t do sandwiches with short shelf-life of two days that we do. We are hoping the Greencore capability in fresh food and fresh prepared food will be very relevant to the innovation agendas of those customers.”
Peacocks made a profit of $40.1 million pre-tax up to September 2016, on sales of $993.1 million. It will certainly transform Greencore’s US business. They will now be looking at 30% of US sales going to frozen breakfast cereals as packaged at the Peacocks facilities. Food to go will be relegated to just 13%.
“We believe Peacock's success is built on the same fundamental strategy and values that drive Greencore, making products that consumers love, building deep, longstanding relationships with customers, investing in high quality manufacturing capacity, food safety capability and, most importantly, people,” added Mr Coveney.
The £594.3 million deal is the feather in the cap of a five year hunt for acquisitions for Greencore. They have been aiming for some time to expand into the US, as the market is positioned just right for their efforts. Demand for food-to-go products is on the rise, and there is less competition.
It is thought that the company will be seeing at least $15 million of cost savings per year by 2019. The US sales of Greencore will also more than quadruple during this time. Estimates put them going up to $1.3 billion.
The stockholders have been supportive, and stock went up 8% overnight in the reaction to the news. This translated to a 24.1p rise. It has been brought up to 316p overall.
Separately, Greencore also reported full year sales of £1.5 million. This is a rise of 10.6% in year on year sales. The underlying pretax profit has risen by around 10% also, to £85.9 million.
Greencore are looking ahead to try to save on costs as a result of the plunge of the pound. Rising dairy prices are also not helping their profits. They will be looking to increase their prices as well as making savings in the supply chain. The addition of US businesses to their umbrella will certainly help in this regard. The further the pound falls, the better their investment in dollar markets begins to look.
The outlook is certainly good for this deal, with no hint of any concern from experts. It could be the kind of change that will catapult Greencore onwards and upwards to greater things.