Greencore and Bakkavor weigh £1.2bn tie-up to form UK convenience food powerhouse

Greencore Group plc and Bakkavor Group plc have entered advanced discussions over a potential merger that could combine two of the United Kingdom’s largest suppliers of convenience food. The proposed £1.2 billion cash and share offer by Greencore for the entire issued and to-be-issued share capital of Bakkavor aims to create a dominant force in the UK food manufacturing sector, generating around £4 billion in combined annual revenues. Both boards have reached an agreement in principle on the key financial terms, though the offer remains conditional upon due diligence, regulatory clearance, and final documentation.

The deal, if formally concluded, would see Bakkavor shareholders receive 85 pence in cash and 0.604 Greencore shares per Bakkavor share. In addition, Bakkavor shareholders would remain eligible for the company’s previously announced final dividend of 4.8 pence per share, scheduled for payment on 28 May 2025, pending shareholder approval. Based on Greencore’s closing share price of 13 March 2025, the day before the offer period began, the implied value of 200 pence per Bakkavor share represents a 32.5% premium to its undisturbed closing price.

What’s driving this £1.2bn convenience food industry consolidation?

The rationale behind the possible Greencore-Bakkavor merger lies in the strategic alignment of two companies long embedded in the UK’s convenience food ecosystem. Bakkavor has a strong presence in fresh prepared foods, including ready meals, salads, and bakery products. Greencore, known for its dominance in food-to-go categories such as sandwiches and chilled snacks, complements Bakkavor’s product lines with strength in different customer channels.

The merger is aimed at capitalising on shifting consumer preferences, where convenience, freshness, and health are increasingly prioritised. A combined business would have broader category coverage, enhanced scale in manufacturing, and deeper relationships with major UK grocers. By integrating their operations, the companies expect to unlock synergies in innovation, automation, procurement, and logistics—while gaining flexibility to address challenges like inflation, labour shortages, and supply chain volatility.

Historically, both companies have sought to grow through M&A. Greencore once had a significant US presence but exited in 2018 to refocus on UK operations. Bakkavor, by contrast, retained a US footprint which, under the terms of this merger, may be divested. The inclusion of a contingent value right (CVR) offers Bakkavor shareholders a potential upside if the US division is sold by June 2026 or within 12 months of the deal’s completion. The CVR would provide additional value if the disposal proceeds exceed nine times EBITDA for that business, net of specified costs.

What are the financial and strategic terms of the Greencore-Bakkavor offer?

The proposed merger structure reflects both cash and share components, allowing Bakkavor shareholders to realise immediate value while also participating in the long-term upside of the combined group. If completed, Greencore shareholders would hold 56% of the enlarged company, while Bakkavor shareholders would control the remaining 44%. The transaction is expected to be implemented via a court-sanctioned scheme of arrangement.

A key driver of the proposal is the significant synergy potential. Both boards believe that operational efficiencies—particularly in manufacturing, distribution, IT systems, and procurement—could deliver material cost savings and bolster margins. RBC analysts estimate synergy gains of £75 million annually within three years, equivalent to 2% to 4% of Bakkavor’s annual revenue. With anticipated returns on capital reaching 12%, this exceeds average sector benchmarks and supports the investment case for the merger.

In addition to cost benefits, the new entity would be better positioned to invest in automation, innovation, and sustainability, key areas where capital expenditure can generate competitive advantage. Moreover, with a broader talent pool and a unified management structure, the business expects to strengthen employee retention and development, particularly in technical, commercial, and supply chain roles.

How has the stock market responded to the merger announcement?

Investors have reacted differently to the announcement. On 2 April 2025, Bakkavor shares surged 6.75% to close at 190.00 pence, reflecting optimism around the attractive premium and potential upside from the CVR linked to the US divestment. Greencore shares, however, fell by 0.67% to 177.40 pence and have declined by over 6% since deal talks began.

This divergence in sentiment reflects classic merger dynamics: the target’s shares rise on premium valuation, while the buyer’s shares often fall amid concerns over cost, dilution, and integration risk. In Greencore’s case, the downward pressure also stems from investor caution about the financial exposure required to fund the cash element of the offer and potential delays in realising synergies.

Analysts believe the market’s mixed response is shaped by a broader weariness toward major M&A transactions during uncertain economic conditions. Rising input costs, softening consumer demand, and volatile foreign exchange rates have left investors wary of execution risks, even in deals with clear strategic logic.

What regulatory and procedural steps remain before completion?

The merger is subject to several layers of regulatory and shareholder approval. As a reverse takeover under the UK Listing Rules, the transaction must be approved by Greencore shareholders. Bakkavor shareholders must also vote in favour of the scheme of arrangement. Greencore is expected to issue new shares as part of the consideration, and will need to publish a prospectus approved by the UK Financial Conduct Authority.

In addition, clearance will be required from the UK Competition and Markets Authority, which will assess any potential anti-competitive effects arising from the deal. While both companies operate in similar product categories, their complementary strengths across segments and customer channels may alleviate competition concerns. Nonetheless, the regulatory timeline could influence deal completion in the months ahead.

Both boards have confirmed that final due diligence is underway and further announcements will be made when appropriate. Greencore retains the right to waive certain pre-conditions but emphasises that a formal Rule 2.7 offer will only proceed upon satisfaction of all required terms.

What does this mean for the UK convenience food industry?

The proposed merger comes at a time when the UK convenience food sector is undergoing structural transformation. Consumer habits have shifted in favour of fresh, healthy, and ready-to-eat food options that save time without compromising quality. Retailers are also increasingly reliant on strategic suppliers capable of co-developing new product lines and adapting to emerging trends.

A combined Greencore-Bakkavor group would be well-positioned to meet these demands. Their integrated capabilities would enable faster product development cycles, greater investment in sustainable packaging and plant-based alternatives, and enhanced service to large UK grocers like Tesco, Sainsbury’s, and Marks & Spencer.

Moreover, the proposed merger highlights the return of strategic dealmaking to the UK’s food sector after a relatively quiet period post-Brexit and during the pandemic. If successful, this transaction could encourage other mid-cap food manufacturers to explore M&A as a route to scale, resilience, and growth.

For investors, the deal offers mixed prospects. Bakkavor shareholders may see short-term gains from the premium valuation and longer-term benefits if synergy targets are met. For Greencore investors, the outcome hinges on integration execution, cost discipline, and the timing of synergy realisation. While the stock has softened post-announcement, a successful deal could position the company as a dominant force in chilled food manufacturing.

With multiple regulatory and shareholder steps still pending, the proposed merger is far from guaranteed. However, the strategic alignment, complementary portfolios, and potential for meaningful synergies make this a deal that could redefine the contours of the UK convenience food landscape for years to come.