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Essenta Foods unveils new divisional bosses and confirms commitment to USA

Trade unions are seeking urgent meetings with bosses at Northern Foods and Greencore in a bid to clarify how the proposed £40m synergy savings will be extracted if the two merge.

While analysts predict that mass factory closures are unlikely given that both firms have recently reduced their footprint in chilled meals and there is surprisingly little overlap in the rest of their operations, job losses were inevitable, a Unite spokeswoman told FoodManufacture.co.uk.

“Jennie [Formby – Unite’s food sector boss] has expressed her extreme concern that we weren’t alerted earlier about this. While there are clearly market sensitivities as these are listed companies, we are well aware of the rules about disclosure and often get a heads up about deals, especially when there is union representation across all the sites.

“We want to know what the £40m savings will mean for jobs."

A meeting was being urgently sought to ensure bosses made good on their promise of only modest redundancies but also "to make sure any job losses are voluntary", she added. "Unite will also be pressing for commitments to uphold all agreements on pay, pensions and conditions, as well as for investment in the merged company."

Deal is 'not about closing factories'

A Greencore spokesman declined to comment on the detail of where the proposed £15m in overhead cost savings would come from, but said the deal was “not about closing factories”.

Much of the saving would come from closing the Northern Foods head office in Leeds and rationalizing shared functions, while suppliers to the two will also be expected to deliver keener terms, said analysts.

The firms also anticipate synergies through leveraging distribution channels, brands, product portfolios and research and development capabilities.

Counterbid?

Meanwhile, the fact that the boards of both firms have recommended the deal to shareholders would make a counterbid more problematic (their shares have also surged following Wednesday‘s announcement), said analysts, but it could not be ruled out.

Their comments came as one industry source speculated to FoodManufacture.co.uk that Kerry Group might consider an approach for Northern Foods.

Shore Capital analyst Clive Black said: “You never can say never when it comes to corporate situations. Both companies are arguably in play at present.

“But the issues for any new suitor are the Board recommendations, the upward price movement since the deal announcement, the synergies that few other combinations can achieve - something that may knock out financial buyers – and the agreement from the pension trustees.”

Supermarket exposure

As for the issue over whether the combined group – dubbed Essenta Foods –would lose some business as the supermarkets sought to reduce their exposure – Black said this was unlikely.

“I think the retailers will broadly give their blessing... there is not huge spare capacity in ready meals and sandwiches.”

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