Bakkavör Group submits binding offer for Geest Plc

Bakkavör Group has submitted a binding offer for Geest PLC, whose board of directors has recommended that shareholders accept the offer. The acquisition will transform Bakkavör Group into the leading fresh prepared foods company in the United Kingdom. The bid is worth 655 pence per share, and a further 7 pence per share will be paid as a special dividend. The total price paid for shares in Geest will be £497.3 million.

Geest PLC, which was founded in 1935, is one of the largest fresh prepared foods companies in the United Kingdom and operates 38 factories in five countries, employing approximately 10,000 people. Geest enjoys a key market position in the United Kingdom and has a 40% market share in fresh salads and a 35% market share in fresh pizzas.

Geest PLC has performed well in recent years. The company’s EBITDA in 2004 amounted to £74.9 million and turnover totalled £902.5 million. The underlying growth rate in operations was 5% in 2004. The enterprise value of the offer amounts to £579.6 million, of which Bakkavör Group is paying £497.3 million for shareholders’ equity and is taking over £82.3 million in debt.  Geest PLC has been listed on the London Stock Exchange since 1986 and will be delisted following the takeover.

The acquisition of Geest will place Bakkavör Group in a leading position on the UK market for fresh prepared foods and produce. The company will operate a total of 42 factories in five countries and will have a workforce of approximately 13,000. Bakkavör Group will be the largest single supplier of fresh prepared foods to British supermarkets and will make over 4,500 products in 16 categories. The company’s management recognises numerous opportunities resulting from this acquisition. Activities in a number of areas, such as product development and factory specialisation, can be integrated, and there is also considerable potential for utilising economies of scale in areas such as purchasing and packaging. The acquisition of Geest will also provide a platform for Bakkavör Group’s intentions to expand  into new markets in Europe and elsewhere. The combined turnovers of the two companies in 2004 was £1,052 million and the combined EBITDA amounted to £99.7 million.

As in previous acquisitions, the management of Bakkavör Group has emphasised the importance of retaining the services of key employees. Bakkavör Group has already entered into an agreement with Gareth Voyle, CEO of Geest, on his continued role at the company, thus ensuring that valuable expertise and experience from Geest is brought on board.

Barclays and Kaupthing Bank have undertaken to provide a loan of £575 million for the acquisition, of which £500 million will be provided by Barclays. A due diligence review has been completed, covering financial, legal, insurance and marketing aspects of operations.

Ágúst Gudmundsson, Executive Chairman of Bakkavör Group.

"Our stated ambition has always been to grow our business organically and through acquisitions, whilst maintaining our status as one of Europe's most successful companies. Adding Geest to the Bakkavör Group portfolio will enable us to exploit our combined strengths through firstly, the partnerships we have with our customers and secondly, by focusing on continuous improvement in our unrivalled quality of service and evolving innovative premium product offering. Geest has developed its position within the fresh prepared food market and demonstrated steady growth. Together we believe we have the strength to open up new opportunities in existing and new markets both in the UK and overseas."

Bakkavör Group was advised on the acquisition by Kaupthing Bank. Other key advisers to Bakkavör Group were Deloitte, which performed a financial due diligence review, and Eversheds, which performed a legal due diligence review and prepared the necessary documents.

Since the board of directors of Geest has agreed to recommend Bakkavör Group’s takeover bid, a shareholders’ meeting in Geest will be held on 21 April. The offer will be put before a vote at the meeting. If the offer is accepted the merger will take effect on 13 May and payment for the shares will be executed on 27 May.

Bakkavör Group will present the new areas of focus in operations and its future vision at the beginning of June.

1.        According to annual accounts of Bakkavör Group and information from a press release issued by Geest. No trading has taken place between the companies.

2.        Comparable methods of reporting. No impact on operating result.

Please click here for full statement issued to the London Stock Exchange. 

Presentation for shareholders

A presentation for shareholders will be held in the conference room Sunnusalur, Hotel Saga today, 8 March, at 12:00 midday. Lýdur Gudmundsson, CEO and Hildur Árnadóttir, CFO will present the company’s offer.