US Private Equity Firm Eyes Greencore
US private equity firm Clayton Dubilier & Rice is reported to have made an approach to buy Greencore, one of the leading convenience food processors in the UK. CD&R specialises in investing in market-leading companies that are typically underperforming. It has shown a preference for distribution- or services-related businesses. Rather than pursuing specific industry segments, the investment group concentrates on companies with broad ‘spread of risk’ characteristics, such as large customer and supplier bases and diverse revenue streams. According to Clayton Dubilier & Rice, it only invest where significant value can be created through operating performance improvements. CD&R has also successfully acquired stand-alone businesses in need of strategic repositioning.
CD&R has experience of owning large food businesses in both the UK and US. It acquired Brakes, the leading supplier to the food service markets in the UK and France in 2002. Before disposing of the business in 2007, CD&R helped Brakes to increase EBITDA by approximately 70% through a series of initiatives to improve margins, reduce costs, restructure operations and integrate acquisitions, all of which developed Brakes into one of Europe’s leading food service distributors. CD&R also owns US Foods, the second largest broadline food service distributor in the US, which was acquired in 2007.
Part of Greencore’s strategy is to develop its food service business in order to reduce its reliance on the multiple retail sector in the UK. Greencore has also been building a convenience food business in the US. Earlier this year, CD&R appointed Sir Terry Leahy, former chief executive of Tesco, as a senior adviser. Greencore is a key supplier to Tesco.
Greencore has still to realise the benefits of its recent £113 million acquisition of Uniq, which will strengthen its standing in the food to go and chilled desserts sectors of the UK food market. Of course, Greencore had earlier in the year failed in its attempt to merge with UK convenience food group Northern Foods in an all share deal of equals to create Essenta Foods, a £1.7 billion turnover business. Boparan Holdings, controlled by Ranjit Singh Boparan, who is head of major British chicken processor 2 Sisters Food Group, spoiled Greencore’s plans with a successful £342 million cash bid for Northern Foods.
