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Bakkavor About-Turn on IPO

Main Image 01 November 2017 | Adam Berry

The Bakkavor Group has changed its mind on the recently cancelled IPO, deciding to go ahead with it after all.

The ready meals company previously said at the beginning of November that the market was too volatile, but now have changed that position.

On, then off, then on again

Bakkavor first said that their IPO was not going to be in the interests of their shareholders, despite the fact that they had what they called “sufficient institutional demand to cover the offering”.

Then, less than a week later, they announced that they were going ahead after all – floating 25% of the business at 180p per share. This gives the company a valuation of £1.04 billion.

However, many eyebrows have been raised at the announcement of that price. They had initially spoken about the price of 195p, and the price slash along with the indecision will certainly put some potential investors on edge. Still, it seems that they are now confident enough to go ahead and make the change.

Bakkavor’s chairman Simon Burke said: "The board and I are delighted to welcome our new shareholders. It is particularly pleasing that our initial register has such a strong presence of well-respected long-term investors, reflecting an appreciation of the quality of the business and its long-term prospects."

Their initial cancellation had been seen as a bit of a blow by analysts of the IPO market in the UK. This was a particularly big hit given that they made the announcement at the same time as another big firm, Arqiva, shelved their own plans.

It seems that those in the executive food jobs for the company were a little worried about the investors they had already spoken to. But since their cancellation, new shareholders came forward and a group of longer-term investors was arranged. This gave them enough to push forward with the listing despite their change of heart.

Food chain giant

Bakkavor has a range of big customers, including supermarkets Sainsbury’s, Tesco, Waitrose, and Marks & Spencer. They also hold the distinction of being the UK’s largest producer of hummus, despite starting out as a cod roe manufacturer.

Last year, they accounted for 40% of the sales of fresh prepared food in the domestic market for their brands.

Brothers Agust and Lydur Gudmundsson then expanded the company and weathered the storm of the Icelandic financial crisis. They grew further after this point, and were soon offering international jobs. They currently have a growing presence in the US and China. Last year, the company generated £1.8 billion in revenue and £63.1 million in pre-tax profit.

Agust is still the chief executive, while Lydur remains a director. Lydur had been a chairman until the decision to make the flotation, which requires an independent candidate to take the role under UK guidelines. Lydur was caught up in some scandal during the Icelandic crisis in 2008, even being ordered to do community service, but seems to have survived it well. The brothers still own the majority share of the business after flotation.

The sale of the new shares will raise £100 million. Some existing shareholders will also be selling their stakes as part of the flotation.

It remains to be seen whether this about-turn was a good decision or a poor one from the Icelandic brothers. What is certainly going to be interesting is seeing how things turn out over the next year and beyond. Are things on the up and up for Bakkavor? Or is this one example of worrying and indecision that could signal rockier times ahead for the ready meal firm?

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