Greencore sells U.S. business for $1bn
The Dublin-headquartered, FTSE 250-listed outfit said it would return £509m, or 72p per shares, of the £802m net proceeds, if they approve the deal. The remaining £293m cash will be used to pay down debt.
Greencore is selling the U.S. business, including the $747.5m acquisition of Peacock Foods which it only completed in December 2016, to Hearthside, an Illinois based contract manufacturer that was recently acquired by Charlesbank Capital Partners, the same company that sold Peackock to Greencore two years ago.
Challenges in the U.S. market had led Greencore to issue a profit warning in March this year, which was blamed on the weak performance of its underutilised non-Peacock sites. Recent third-quarter results showed revenue in the original part of the U.S. business decreased by 25.2% due to volume declines, while Peacock growth accelerated to 19.4%.
The U.S. business made £503.6m and £12.6m operating profit in the first half of 2018 and £881.3m and £33m operating profit in the last full year. Greencore said the total proceeds of the deal represent 41% of the group's estimated enterprise value, and the £817m value of the transaction is 13.4 times the level of full year adjusted EBITDA, the company said, or 14.2 times when allocated central costs are included. ■