Greencore Expands In US With $750m Acquisition
Published on Nov 15 2016 9:45 AM
Convenience food group Greencore is expanding further into the US with the acquisition of convenience food manufacturer Peacock. The Irish group is set to purchase Peacock for $750 million (€697 million).
Greencore said that the acquisition of Peacock would have the potential to “transform Greencore’s market and channel position in the US and create a strong platform for long term profitable growth”, and that it accelerates the group’s vision to become an international conveience food leader.
The acquisition would quadruple Greencore’s existing US revenue base. It’s priced at 10.4 times earnings, though this falls to 8.4 when potential synergy and tax benefits are counted in.
Peacock manufactures convenience foods with strong positions in frozen breakfast sandwiches, kids’ chilled meal kits and salad kits, and generates revenues of approximately $1 billion and adjusted earnings (EBITDA) of $72.1 million in year to September 2016.
The deal will potentially increase Greencore’s US revenues to 42 per cent of total group revenues. It awaits shareholder approval, at an extraordinary general meeting to be held on December 7.
Patrick Coveney, CEO of Greencore, announced the planned acquisition on the same day as he presented the company’s financial results for the year ending September 30, and said that it had been another year of “strong performance” for the London-listed group.
“In the UK, we have delivered substantial like-for-like growth against the backdrop of a challenging retail market and an uncertain economic environment, and in the US we now have a business that is primed to deliver sustainable, profitable growth. Given the underlying commercial momentum across the group, our strong market positions, the transformational acquisition of Peacock Foods in the US that we have announced separately today, and our recent new business wins, we are confident about Greencore’s future prospects.”
Group revenue for the year rose by 10.6 per cent to £1,481.9 million (€1.7 billion), up 5.9 per cent on a like-for-like basis. Group earnings (EBITDA) advanced by 13.9 per cent to £138.4 million, with operating profit up 11.2 per cent to £102 million. Pre-tax profits fell by 18.5 per cent to £48.2 million.
Net debt rose by £66.3 million to £331.8 million, driven by an increase in capital expenditure as well as sterling depreciation as a result of Brexit.
Greencore is to pay shareholders a final dividend of 4.10 pence per share, giving a total dividend of 6.65 pence per share, up 8.1 per cent.
The group’s benefitting from historic tax losses over the last five years is set to end as of September 2016, meaning its effective tax rate of just 2 per cent is set to rise in future. Looking ahead, however, Mr Coveney said he is confident that the group is “well set to achieve further progress in FY17 and beyond”.
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