TIDMGNC
RNS Number : 9962Z
Greencore Group PLC
24 January 2011
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION (DIRECTLY OR
INDIRECTLY) IN WHOLE OR IN PART, IN OR INTO ANY JURISDICTION WHERE
TO DO THE SAME WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF
SUCH JURISDICTION.
THE NEW GREENCORE SHARES TO BE ISSUED PURSUANT TO THE MERGER
HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED, NOR UNDER ANY OF THE RELEVANT
SECURITIES LAWS OF CANADA, AUSTRALIA, JAPAN OR SOUTH AFRICA.
ACCORDINGLY, THE NEW GREENCORE SHARES MAY NOT BE OFFERED, SOLD OR
DELIVERED, DIRECTLY OR INDIRECTLY, IN CANADA, AUSTRALIA, JAPAN OR
SOUTH AFRICA, EXCEPT PURSUANT TO EXEMPTIONS FROM APPLICABLE
REQUIREMENTS OF ANY SUCH JURISDICTION.
FOR IMMEDIATE RELEASE 24 January 2011
Greencore Group plc ('Greencore')
Statement on Merger Benefits
As a consequence of the announcement of a recommended cash offer
by BH Acquisitions Limited for Northern Foods Plc ('Northern
Foods'), Greencore is required by the City Code on Takeovers and
Mergers to formally report on the merger benefits statement made in
connection with the synergies stated in the announcement on 17
November 2010 (the 'Merger Announcement') as part of the proposed
combination between Greencore and Northern Foods to create Essenta
Foods (the 'Merger'). The board of Greencore confirms the GBP40
million annual costs synergies which were referred to in the Merger
Announcement and is providing further details of the sources and
bases of preparation of these expected synergies, together with
reports thereon from KPMG LLP and from Barclays Capital, financial
adviser to Greencore.
Synergy benefits
-- In the period from the Merger Announcement to 17 December
2010, a combined team of senior executives from both Northern Foods
and Greencore undertook a detailed integration planning process. In
particular, since the Merger Announcement, a joint integration team
was able to undertake further work on estimated synergies,
including an independently conducted exercise to look at purchasing
overlap in greater detail and a more detailed review of both
companies' operational structures, operational programmes and
distribution and supply chains
-- This process has reinforced the belief of the board of
Greencore on the delivery of the annual net cost synergies of at
least GBP40 million.1 These synergies are expected to comprise
approximately GBP15 million from overhead cost savings,
approximately GBP20 million from purchasing and supply chain
improvements and approximately GBP5 million from financing and tax
efficiencies. These savings are in addition to any cost savings
that may be made from the removal of overhead costs from the
standalone Northern Foods cost base as a result of Northern Foods'
previously announced restructuring. In addition, Greencore believes
there is potential for further upside from additional operational
synergies which have not yet been fully quantified.
-- The board of Greencore believes that at least half of these
synergies would be realised in the first 12 months after completion
of the Merger, rising to approximately 90% in the second year after
completion of the Merger, with the full amount of synergies being
realised in the third year after completion of the Merger. It is
expected that realisation of these synergies would incur one-off
cash costs of approximately GBP45 million, of which approximately
two-thirds would be incurred in the first 12 months after
completion of the Merger, with the remainder being incurred in the
following year
-- In addition to these cost synergies, the board of Greencore
believes that the Merger would provide an opportunity to achieve
certain revenue synergies through leveraging distribution channels,
brands, product portfolios and research and development capability
across the combined group. These additional synergies have not been
quantified.
Analysis of the expected synergies
Overhead cost savings
Annual synergies of approximately GBP15 million are expected to
be achieved through creating a single group management structure
and head office function, specifically:
-- Creation of a single board and single executive management
team;
-- Combination of group functions and removal of duplication in
areas including group finance, treasury, tax , corporate
development and legal;
-- Creation of a single operating entity in UK, eliminating
overlapping roles across the business, within category businesses
and within manufacturing units;
-- Rationalisation of head office locations; and
-- Reduction in advisory and regulatory fees.
Purchasing and supply chain synergies
Annual synergies of approximately GBP20 million are expected to
be achieved through realising the benefits of a total combined
purchasing base in excess of GBP1 billion, specifically:
-- Generating efficiencies through scale with common suppliers
across both organisations;
-- Establishing common terms with suppliers;
-- Creating a single purchasing organisation;
-- Leveraging the larger distribution and supply chain; and
-- Lowering storage costs and sharing trucks.
Financing and tax synergies
Annual tax synergies of approximately GBP3 million are expected
to be achieved through moving Northern Foods to Greencore's tax
structure and Essenta Foods being domiciled in Ireland. The
financing synergies of approximately GBP2 million per annum are
expected to be achieved through lower interest rates on a business
with a stronger balance sheet and with an expected investment grade
rating from the DBRS rating agency.
Cost of achieving synergies
The one-off costs of achieving these synergies are expected to
be approximately GBP45 million, of which approximately two-thirds
would be incurred in the first 12 months after completion of the
Merger, with the remainder being incurred in the following
year.
Additional operational synergies
We have not quantified the potential benefit from additional
operational synergies but believe there will be upside potential
through implementation of existing lean operations practices across
both businesses. Greencore has achieved significant cost reductions
per unit through the successful implementation of these programmes,
specifically:
-- Labour productivity optimisation
-- Raw material waste initiatives
-- Manufacturing optimisation
-- Energy and maintenance programmes
Reports
The estimate of synergies has been reported on as required by
the City Code on Takeovers and Mergers by KPMG LLP and by
Greencore's financial advisers, Barclays Capital. Copies of letters
from KPMG LLP and Barclays Capital are set out in this
Appendix.
Bases of calculation
Baseline cost numbers were agreed based on the underlying
business plans of both parties to the Merger and, for the synergies
arising from the combination of group functions, organisation
information and role profiles were reviewed. Working teams from
both Northern Foods and Greencore reviewed all relevant costs and
considered the impact of the Merger on these costs. Cost saving
assumptions were based on a detailed, bottom-up evaluation of the
benefits available from elimination of duplicate activities, the
leverage of combined scale economies and operational efficiencies
arising from consolidation of procurement and activities within
manufacturing facilities. In determining the estimate of cost
savings achievable through the combination of Greencore and
Northern Foods, no savings relating to operations have been
included where no overlap exists. An independent team from KPMG LLP
was used to validate the purchasing synergies by analysing sample
data from both businesses.
In determining the organisation cost synergies, the new Essenta
Foods board, as announced on 17 November 2010, and the senior
management team had been fully costed and formed part of the
discussions involving Greencore and Northern Foods management.
In determining the financing and tax synergies, both parties
worked together on the assumption of the merged company (Essenta
Foods plc) being domiciled in Ireland. Independent advice was
sought to analyse the tax benefits that would arise from the
Merger.
Where appropriate, assumptions were used to estimate the costs
of implementing the new structures, systems and processes required
to realise the synergies. These assumptions were agreed by
management of both parties.
Important Notes
1. The statements of estimated cost savings and synergies relate
to future actions and circumstances which, by their nature, involve
risks, uncertainties and contingencies. As a result, the cost
savings and synergies referred to may not be achieved, or those
achieved could be materially different from those estimated. No
statement in this announcement should be construed as a profit
forecast or interpreted to mean that Essenta Foods' earnings in the
first full year following the Merger, or in any subsequent period,
would necessarily match or be greater than or be less than those of
Greencore and/or Northern Foods for the relevant preceding
financial period or any other period.
2. Due to the scale of the combined group, there may be
additional changes to the combined group's operations. As a result,
and given the fact that the changes relate to the future, the
resulting cost savings may be materially greater or less than those
estimated.
3. In arriving at the estimate of synergies set out in this
announcement the Directors of Greencore have assumed that there
will be no significant impact on the business of the combined group
arising from any decisions made by Competition Authorities or
regulatory bodies.
Responsibility
The directors of Greencore accept responsibility for the
information contained in this announcement. To the best of the
knowledge and belief of the directors of Greencore (who have taken
all reasonable care to ensure that such is the case) the
information contained in this announcement for which they accept
responsibility is in accordance with the facts and does not omit
anything likely to affect the import of such information.
Dealing Disclosure Requirements
Under Rule 8.3(a) of the City Code on Takeovers and Mergers (the
"Code") any person who is interested in 1% or more of any class of
relevant securities of an offeree company or of any paper offeror
(being any offeror other than an offeror in respect of which it has
been announced that its offer is, or is likely to be, solely in
cash) must make an Opening Position Disclosure following the
commencement of the offer period and, if later, following the
announcement in which any paper offeror is first identified. An
Opening Position Disclosure must contain details of the person's
interests and short positions in, and rights to subscribe for, any
relevant securities of each of (i) the offeree company and (ii) any
paper offeror(s). An Opening Position Disclosure by a person to
whom Rule 8.3(a) applies must be made by no later than 3.30 pm
(London time) on the 10th business day following the commencement
of the offer period and, if appropriate, by no later than 3.30 pm
(London time) on the 10th business day following the announcement
in which any paper offeror is first identified. Relevant persons
who deal in the relevant securities of the offeree company or of a
paper offeror prior to the deadline for making an Opening Position
Disclosure must instead make a Dealing Disclosure.
Under Rule 8.3(b) of the Code, any person who is, or becomes,
interested in 1% or more of any class of relevant securities of the
offeree company or of any paper offeror must make a Dealing
Disclosure if the person deals in any relevant securities of the
offeree company or of any paper offeror. A Dealing Disclosure must
contain details of the dealing concerned and of the person's
interests and short positions in, and rights to subscribe for, any
relevant securities of each of (i) the offeree company and (ii) any
paper offeror, save to the extent that these details have
previously been disclosed under Rule 8. A Dealing Disclosure by a
person to whom Rule 8.3(b) applies must be made by no later than
3.30 pm (London time) on the business day following the date of the
relevant dealing.
If two or more persons act together pursuant to an agreement or
understanding, whether formal or informal, to acquire or control an
interest in relevant securities of an offeree company or a paper
offeror they will be deemed to be a single person for the purpose
of Rule 8.3.
Opening Position Disclosures must also be made by the offeree
company and by any offeror and Dealing Disclosures must also be
made by the offeree company, by any offeror and by any persons
acting in concert with any of them (see Rules 8.1, 8.2 and
8.4).
Details of the offeree and offeror companies in respect of whose
relevant securities Opening Position Disclosures and Dealing
Disclosures must be made can be found in the Disclosure Table on
the Takeover Panel's website at www.thetakeoverpanel.org.uk,
including details of the number of relevant securities in issue,
when the offer period commenced and when any offeror was first
identified. If you are in any doubt as to whether you are required
to make an Opening Position Disclosure or a Dealing Disclosure, you
should contact the Takeover's Panel's Market Surveillance Unit on
+44 (0)20 7638 0129.
Cautionary Note Regarding Forward Looking Statements
This announcement includes forward-looking statements, such as
Greencore's beliefs and expectations regarding the proposed
combination with Northern Foods. These statements are based on
certain assumptions and reflect Greencore's current expectations.
Forward-looking statements also include statements about
Greencore's beliefs and expectations related to the Merger,
benefits that would be afforded to customers, benefits to the
combined group that are expected to be obtained as a result of the
Merger, as well as the parties' ability to enhance shareholder
value through, among other things, the delivery of expected
synergies. There can be no assurance that the Merger will be
consummated or that the anticipated benefits will be realised. The
Merger is subject to various approvals and the fulfilment of
certain conditions, and there can be no assurance that any such
approvals will be obtained and/or such conditions will be met. All
forward-looking statements in this announcement are subject to a
number of risks and uncertainties that could cause actual results
or events to differ materially from current expectations. These
risks and uncertainties include: the ability to achieve the cost
savings and synergies contemplated through the Merger; the failure
of Greencore and Northern Foods shareholders to approve the Merger;
the effect of regulatory conditions, if any, imposed by regulatory
authorities; the reaction of Greencore's and Northern Foods'
customers, employees and suppliers to the Merger; the ability to
promptly and effectively integrate the businesses of Greencore and
Northern Foods; and the diversion of management time on
Merger-related issues. Additional factors that could cause actual
results or events to differ materially from current expectations
are discussed in Greencore's and Northern Foods' respective
materials filed with the securities regulatory authorities in the
United Kingdom and in the Republic of Ireland (as the case may be)
from time to time including Greencore's Annual Report and Accounts
for the financial year ended 24 September 2010 and Northern Foods'
Annual Report and Accounts for the 53 week period ended 3 April
2010. Any forward-looking statements made by or on behalf of
Greencore speak only as of the date they are made. Greencore
disclaims any intention or obligation to update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise. Past performance is no guarantee of
future performance.
This announcement has been prepared without taking into account
the investment objectives, financial situation or needs of any
particular person.
Notice to U.S. Investors
The information contained herein does not constitute an offer of
securities for sale in the United States or offer to acquire
securities in the United States.
The Greencore ordinary shares have not been, and are not
intended to be, registered under the U.S. Securities Act of 1933,
as amended (the "Securities Act") and may not be offered or sold,
directly or indirectly into the United States except pursuant to an
applicable exemption. The Greencore ordinary shares are intended to
be made available within the United States in connection with the
Merger described herein pursuant to an exemption from the
registration requirements of the Securities Act.
The Merger described herein relates to the securities of a
non-U.S. company. The Merger is subject to disclosure and
procedural requirements of Ireland and the United Kingdom, which
are different from those of the United States. Financial statements
included in the document, if any, have been prepared in accordance
with International Financial Reporting Standards as adopted by the
European Union, which may not be comparable to the financial
statements of United States companies.
It may be difficult for you to enforce your rights and any claim
you may have arising under the U.S. federal securities laws, since
Greencore and Northern Foods are located in Ireland and the United
Kingdom respectively, and some or all of their officers and
directors may be residents of Ireland, the United Kingdom or other
non-U.S. countries. You may not be able to sue a non-U.S. company
or its officers or directors in a non-U.S. court for violations of
the U.S. securities laws. It may be difficult to compel a non-U.S.
company and its affiliates to subject themselves to a U.S. court's
judgment.
1
Important Note:
These statements of estimated cost savings and synergies relate
to future actions and circumstances which, by their nature, involve
risks, uncertainties and contingencies. As a result, the cost
savings and synergies referred to may not be achieved, or those
achieved could be materially different from those estimated.
Neither this statement nor any other statement in this document
should be construed as a profit forecast or interpreted to mean
that Essenta Foods' earnings in the first full year following the
Merger, or in any subsequent period, would necessarily match or be
greater than or be less than those of Greencore and/or Northern
Foods for the relevant preceding financial period or any other
period.
A copy of this announcement is and will be available free of
charge for inspection on Greencore's website at www.greencore.com
during the course of the Merger.
Appendix
Published report on merger benefits statements
The Directors Greencore Group plc
2 Northwood Avenue
Northwood
Santry
Dublin 9
Ireland
Barclays Capital (the investment banking division of Barclays
Bank PLC)
5 North Colonnade
Canary Wharf
London E14 4BB
United Kingdom
24 January 2011
Dear Sirs
Greencore Group plc
We refer to the statement made by the directors of Greencore
Group plc ('the Directors') on page one of the Statement of merger
benefits ('the Statement') to the effect that:
"The board of Greencore confirms the GBP40 million annual costs
synergies which were referred to in the Merger Announcement"
The Statement has been made in the context of the disclosures on
pages four to six setting out, inter alia, the basis of the
Directors' belief (including sources of information) supporting the
Statement and their analysis and explanation of the underlying
constituent elements.
This report is required by Note 8(b) to Rule 19.1 of the City
Code on Takeovers and Mergers ('the City Code') and is given for
the purpose of complying with that requirement and for no other
purpose.
Responsibility
The Statement is the responsibility solely of the Directors. It
is our responsibility and that of Barclays Capital (the investment
banking division of Barclays Bank PLC) to form respective opinions,
as required by Note 8(b) to Rule 19.1 of the City Code as to
whether the Statement has been made by the Directors with due care
and consideration.
Save for any responsibility which we may have to those persons
to whom this report is expressly addressed, to the fullest extent
permitted by law we do not assume any responsibility and will not
accept any liability to any other person for any loss suffered by
any such other person as a result of, arising out of, or in
connection with this report.
Basis of opinion
We have discussed the Statement, together with the underlying
plans, with the Directors and with Barclays Capital (the investment
banking division of Barclays Bank PLC). We have also considered the
letter dated 24 January 2011 from Barclays Capital (the investment
banking division of Barclays Bank PLC) to the Directors on the same
matter. Our work did not involve any independent examination of any
of the financial or other information underlying the Statement. We
conducted our work in accordance with Standards for Investment
Reporting issued by the Auditing Practices Board of the United
Kingdom.
We do not express any opinion as to the achievability of the
benefits identified by the Directors in the Statement. The
Statement is subject to uncertainty as described on page five of
the Statement. Because of the significant changes in the enlarged
group's operations expected to flow from the merger and because the
Statement relates to the future, the actual merger benefits
achieved are likely to be different from those anticipated in the
Statement and the differences may be material.
Opinion
On the basis of the foregoing, we report that in our opinion the
Directors have made the Statement, in the form and context in which
it is made, with due care and consideration.
Yours faithfully
Letter from Barclays Capital
24 January 2011
The Directors
Greencore Group plc
No.2 Northwood Avenue Northwood Business Park
Santry Dublin 9 Ireland
Dear Sirs,
Proposed combination between Greencore Group plc and Northern
Foods plc
We refer to the statement of estimated cost savings, the bases
of preparation thereof and the notes thereto (together the
'Statement') made by Greencore Group plc ('Greencore') set out in
this announcement, for which the Directors of Greencore (the
'Directors') are solely responsible.
We have discussed the Statement, together with the relevant
bases of belief (including the assumptions and sources of
information referred to therein) with the Directors and those
officers and employees of Greencore who developed the underlying
plans. The Statement is subject to uncertainty as described in this
announcement and our work did not involve an independent
examination of any of the financial or other information underlying
the Statement.
We have relied upon the accuracy and completeness of all the
financial and other information reviewed by us and have assumed
such accuracy and completeness for the purposes of rendering this
letter. We have also reviewed the work carried out by KPMG and have
discussed with them the conclusions stated in their letter of 24
January 2011 addressed to yourselves and ourselves on this
matter.
We do not express any opinion as to the achievability of the
cost savings identified by the Directors. Because of the
significant changes in the enlarged group's operations expected to
flow from the merger and because the Statement relates to the
future, the actual cost savings achieved are likely to be different
from those anticipated in the Statement and the differences may be
material.
This letter is provided pursuant to our engagement letter with
Greencore solely to the Directors in connection with Note 8(b) of
Rule 19.1 of the City Code on Takeovers and Mergers and for no
other purpose. We accept no responsibility to Northern Foods or its
shareholders or any other person other than the Directors in
respect of the contents of, or any matter arising out of or in
connection with, this letter.
On the basis of the foregoing, we consider that the Statement by
Greencore, for which the Directors are solely responsible, has been
made with due care and consideration in the context in which it was
made.
Yours faithfully,
Mark Todd
Managing Director
For and on behalf of Barclays Capital, the investment banking
division of Barclays Bank PLC
Barclays Capital, the investment banking division of Barclays
Bank PLC ("Barclays Capital"), which is authorised and regulated in
the United Kingdom by the Financial Services Authority, is acting
exclusively for Greencore and for no one else as sole financial
adviser, joint corporate broker, and joint sponsor in connection
with the Merger and will not be responsible to anyone other than
Greencore for providing the protections afforded to its clients or
for providing advice in relation to the Merger or any other matters
referred to in this document.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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