Greencore Announces The Proposed Acquisition Of Peacock Foods

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THIS DOCUMENT, WHICH CONTAINS INSIDE INFORMATION, IS AN ADVERTISEMENT AND DOES NOT CONSTITUTE A PROSPECTUS (OR PROSPECTUS EQUIVALENT DOCUMENT) AND INVESTORS SHOULD NOT SUBSCRIBE FOR OR PURCHASE ANY SECURITIES OF GREENCORE REFERRED TO IN THIS DOCUMENT EXCEPT SOLELY ON THE BASIS OF THE INFORMATION IN THE FINAL PROSPECTUS (THE “PROSPECTUS”) TO BE PUBLISHED TODAY IN CONNECTION WITH THE PROPOSED RIGHTS ISSUE AND THE ADMISSION OF THE SECURITIES TO THE OFFICIAL LIST OF THE FINANCIAL CONDUCT AUTHORITY AND TO TRADING ON THE LONDON STOCK EXCHANGE’S MAIN MARKET FOR LISTED SECURITIES.  COPIES OF THE PROSPECTUS WILL, FOLLOWING PUBLICATION, BE AVAILABLE FROM GREENCORE’S REGISTERED OFFICE AT NO 2 NORTHWOOD AVENUE, NORTHWOOD BUSINESS PARK, SANTRY, DUBLIN D09 X5N9, IRELAND AND AT GREENCORE GROUP UK CENTRE, MIDLAND WAY, BARLBOROUGH LINKS BUSINESS PARK, BARLBOROUGH, CHESTERFIELD, S43 4XA.  THIS DOCUMENT DOES NOT CONSTITUTE OR FORM PART OF, AND SHOULD NOT BE CONSTRUED AS, AN OFFER, SOLICITATION OR INVITATION TO PURCHASE, SUBSCRIBE FOR, OR OTHERWISE ACQUIRE, ANY SECURITIES OF GREENCORE, NOR SHALL IT OR ANY PART OF IT NOR FACT OF ITS DISTRIBUTION FORM THE BASIS OF OR BE RELIED ON IN CONNECTION WITH, OR ACT AS AN INDUCEMENT TO ENTER, ANY CONTRACT OR COMMITMENT WHATSOEVER.

14 November 2016

Proposed $747.5m Acquisition of Peacock Foods

Accelerates Greencore towards its vision to become a fast-growing, international convenience food leader

Greencore Group plc (“Greencore”) a leading international convenience food business, is pleased to announce the proposed acquisition of Peacock Foods (“Peacock”) for total consideration calculated by reference to an enterprise value of $747.5 million (£594.3 million at 1.2577 exchange rate) on a debt free and cash free basis (the “Acquisition”).

Transaction Highlights

• Peacock is a fast-growing US convenience food manufacturer with strong positions in frozen breakfast sandwiches, kids’ chilled meal kits and salad kits, generating revenues of approximately $1 billion and Adjusted EBITDA of $72.1 million in year to September 2016
• Combined business has the potential to transform Greencore’s market and channel position in the US and create a strong platform for long term profitable growth
• Funded by a fully underwritten rights issue offered to Qualifying Shareholders to raise a total of £439.4 million and new debt facilities of approximately £200 million. Pro forma net debt / EBITDA of 2.5x
• Compelling strategic rationale, with expected significantly enhanced earnings and targeted return ahead of cost of capital from first full year of ownership

Commenting on the Acquisition, Greencore’s CEO, Patrick Coveney said:

“The acquisition of Peacock will transform our US business, strengthen our position in high growth categories, broaden our channel and customer exposure, and add significant scale to our operations. We believe Peacock’s success is built on the same fundamental strategy and values that drive Greencore, making products that consumers love, building deep, longstanding relationships with customers, investing in high quality manufacturing capacity, food safety capability and, most importantly, people. We are delighted to welcome the Peacock team into the Greencore Group.”

Tom Sampson, Peacock Foods CEO, added:

“We are thrilled to be joining the Greencore team at this important time in our growth.  We have been particularly struck by the similarities in the way we run our business and our mutual long-term commitment to the US convenience food market. We are excited by the opportunity that we now have to leverage Greencore’s expertise in innovation and fresh food manufacturing, thereby bringing a broader set of capabilities to our customers.”

PEACOCK IS A FAST-GROWING CONVENIENCE FOOD MANUFACTURER

• Peacock manufactures convenience food products for large US consumer packaged goods (“CPG”) customers
• Focused on fast-growing categories such as frozen breakfast sandwiches, kids’ snack kits and salad kits, and supported by the industry trend towards outsourced manufacturing
• Deep, long-standing relationships with CPG leaders including Tyson Foods®, KraftHeinz® and Dole®
• Headquartered in Geneva, Illinois, and operating from seven large well-invested facilities with a track record of quality and safety, and expertise in automation, project engineering and packaging
• Attractive contract model including co-investment with customers for capital expenditure on new projects
• Strong historic profit growth with Adjusted EBITDA growth of 36.6% between the 12 months ended September 2015 and September 2016

Compelling Strategic Rationale

The Acquisition transforms Greencore’s position in the US and provides a platform for sustained profitable growth.

• Operating scale in the US: represents a step change in scale in overall revenues, presence in attractive growing categories, and national manufacturing footprint
• Strong market positions: increases exposure to leading brands in fast-growing categories such as frozen breakfast sandwiches, kids’ snack kits and salad kits
• New channels and new customers: brings long term relationships with leading customers in complementary channels, such as Tyson Foods®, KraftHeinz® and Dole®; Greencore senior executives have met with Peacock customers, representing approximately 70% of Peacock’s revenues, who have expressed their support for the acquisition and the continuation of existing supply agreements
• Enhanced operating capacity with broader geographic reach: adds seven well-invested scale sites to create a network that will have five times the footprint of Greencore’s current US operations and enhanced geographic reach
• Complementary competencies: adds experience in automation, project engineering and packaging formats to Greencore’s existing strong competencies in food safety, innovation, new product development, and short shelf-life food manufacturing; the broader set of capabilities creates significant opportunities to bring new products to existing customers and to further develop new channels and customers
• Strengthened leadership team for a larger US business

INTEGRATION AND MANAGEMENT STRUCTURE

• The new US division (which, after Completion, will include Peacock) will be led by the CEO of Greencore’s US division, Chris Kirke
• Thomas Sampson (Peacock’s CEO) will be appointed as a senior advisor to Greencore with particular responsibility for managing customer transition and integration over the next two years
• The new management team will be made up of members of both Greencore’s and Peacock’s current senior management teams, with the key members identified and in place

Strong Financial Rationale and Attractive Returns

• Significantly enhanced expected earnings from first full year following acquisition due to strong earnings and growth profile of Peacock and the realisation of cost synergies
• Anticipated return on capital expected to exceed current cost of capital from first full year following acquisition
• Significantly increased operating cash generation and strong group deleveraging profile expected
• Projected annual cost synergies of at least $15 million by FY19 through combining Peacock with Greencore operations
• Attractive tax attributes with expected historical tax assets of at least $65 million; limited levels of cash tax expected in the US in the medium term
• Continued progressive dividend policy with intended payout ratio target of 30-40% of Adjusted Earnings
• Strong outlook with continued momentum through new contracts and underlying segment growth

The Acquisition and related expenses will be financed through a combination of a fully underwritten rights issue offered to Qualifying Shareholders to raise a total of £439.4 million (the “Rights Issue”) and new debt facilities aggregating approximately £200 million. The Rights Issue will comprise 9 New Greencore Shares issued at 153 pence per share for every 13 Existing Greencore Shares. The Rights Issue has been fully underwritten by HSBC Bank plc (“HSBC”), Goodbody Stockbrokers UC (“Goodbody”), Jefferies International Limited (“Jefferies”), and Coöperatieve Rabobank U.A. (“Rabobank”) (together, the “Underwriters”).

The Acquisition is of sufficient size relative to the Greencore Group to constitute a Class 1 transaction for the purposes of the Listing Rules and the Acquisition is therefore conditional, among other things, upon the approval of Shareholders. The Rights Issue is also conditional upon, among other things, the passing of the Transaction Resolutions (as defined in the Circular to Greencore Shareholders being posted today). Accordingly, an Extraordinary General Meeting (“EGM”) of Greencore is to be held on 7 December 2016 for the purposes of approving the Acquisition and the Transaction Resolutions that are required in order to implement the Rights Issue and a circular, including the notice of the Extraordinary General Meeting, to Greencore Shareholders is being issued today.

Abbreviated timetable of principal events

These dates and times are indicative only and assume that the requisite regulatory clearances have been obtained and the other conditions to completion have been satisfied before the date estimated for completion. Accordingly these dates and / or times may be changed by Greencore in consultation with the Joint Bookrunners and Joint Sponsors, in which event details of the new times and dates will be notified to the UKLA, the London Stock Exchange and by an announcement on a regulatory information service to Qualifying Shareholders.

Except where otherwise indicated, references to a time of day are to Irish time.

Analysts and Investors

A presentation for analysts and investors will be held today, 14 November 2016, at The Andaz Hotel, 40 Liverpool Street, London, EC2M 7QN at 9am (London time). If you would like to attend please contact Powerscourt.

A link to a live webcast of the presentation and a copy of the presentation will be available at www.greencore.com

If you wish to dial into the conference call you can do so on the following details:

UK number:                          +44 (0) 20 3427 1908

Ireland number:                  +353 (0) 1 246 5602

USA number:                        +1 212 444 0896

The participant code:          7652386

A replay of the presentation will be available on www.greencore.com. It will also be available through a conference call replay facility, which will be available for one week. To access this replay, please dial:

UK number:                          +44 (0) 20 3427 0598

Ireland number:                  +353 (0) 1 486 0902

USA number:                        +1 347 366 9565

The participant code:          7652386

The preceding summary should be read in conjunction with the full text of the following announcement and its appendices.

The defined terms in this announcement set out in Appendix I apply to this announcement.

Enquiries

Greencore

Conor O’Leary, Group Company Secretary

Powerscourt

Rob Greening, Lisa Kavanagh

+44 (0) 20 7250 1446

Drury | Porter Novelli

Billy Murphy, Sarah O’Connor

+ 353 (0) 1 260 5000

Sole Financial Adviser and Joint Sponsor to Greencore

Greenhill & Co International LLP

Seamus Moorhead, Anthony Parsons

+44 (0) 20 7198 7400

Joint Sponsor, Joint Global Co-ordinator, Joint Bookrunner and Lead Underwriter to Greencore

HSBC Bank plc

Mark Dickenson, Samuel Hart

+44 (0) 20 7991 8888

Joint Global Co-ordinator, Joint Bookrunner, Underwriter and Corporate Broker to Greencore

Goodbody Stockbrokers

Linda Hickey, John Flynn

+ 353 (0) 1 667 0420

NOTES TO EDITORS

Greencore:

• A leading manufacturer of convenience food in the UK and the US
• Strong market positions in the UK convenience food market across food to go, chilled prepared meals, chilled soups and sauces, ambient sauces & pickles, cakes & desserts and Yorkshire Puddings
• A fast-growing food to go business in the US, serving both the convenience and small store channel and the grocery channel
• Greencore is headquartered in Dublin, Ireland and employs approximately 12,800 people worldwide

Peacock:

• Peacock is a US based convenience food manufacturer with a particular focus on sandwiches and chilled meals.
• Its customers are predominantly leading consumer packaged goods (“CPG”) brand owners in the US, including Tyson, KraftHeinz and Dole
• Peacock produces a variety of frozen, chilled, and ambient food products for leading brands in fast-growing categories, such as Jimmy Dean in frozen breakfast sandwiches, Kraft Lunchables in kids’ chilled meal kits, and Dole in salad kits components
• Peacock is headquartered in Geneva, Illinois, and employs over 1,150 people, excluding outsourced workers obtained from labour suppliers, in seven facilities across the US, with over two million square feet of manufacturing

To download the full announcement click here.

To download our acquisition fact sheet click here.

To download the Peacock Foods fact sheet click here.

To download the Greencore fact sheet click here.