Fresh products supplier Bakkavor, which is the subject of a takeover proposal by peer Greencore, is selling its operations in China.
In a transaction that UK-headquartered Bakkavor put at around £50m ($66.9m), the China business is being offloaded to Lihe Xing (Qingdao) Food Technology Co., which is wholly owned by Lihoo’s (Qingdao) Food Industry Company, according to a statement today (29 April).
Bakkavor, a private-label producer of ready meals to fresh salads and dips, added the deal includes seven manufacturing facilities in China.
It said Bakkavor China Holdings supplies the retail and foodservice channels with salads, ready meals and sandwiches. The business generated revenue last year of £105m, while the factories employ around 2,300 people.
“Over the last two years, Bakkavor has made significant progress in simplifying its operations in China and, as part of its previously stated review of its strategic options, this sale completes the group’s exit from the region,” the London-listed business said.
CEO Mike Edwards added: “With strong foundations in place, we are confident that going forward the business and its stakeholders will benefit from Lihoo’s local expertise and experience as a frozen and fresh meal manufacturer.
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By GlobalData“Over the last 20 years, we have built a great business in China and I would like to thank all our China colleagues for their contribution to the significant progress we have made in recent years.”
The transaction needs regulatory approval in China and if that is forthcoming, the deal is expected to close in the second half of this year.
Bakkavor added that as of the end of December, the “carrying value” of its assets in China was £39m, with a “net profit on disposal” expected to be around the £15m mark.
The China operations were “historically dilutive” to the company’s adjusted operating profit margin, Bakkavor said, as it seeks to achieve a “medium-term” margin target of 6%.
That margin was 5% in 2024, up 70 basis points from the previous year, Bakkavor revealed in March when it published its annual results.
Adjusted operating profit increased 20.5% to £113.6m based on group revenue of £2.29bn, which represented a 4% gain on the corresponding period.
Adjusted EPS was 12.3 pence, compared to 8.8p.
Greencore, meanwhile, was given an extended period to conclude its bid for Bakkavor earlier in April, with the UK Panel on Takeovers and Mergers granting the target company’s request for an extension to 9 May.
Ireland-headquartered Greencore first made an approach for Bakkavor in March but had two offers turned down.
A revised offer in the potential £1.2bn deal was then preliminarily agreed “in principle” by the boards of the two companies.
Markets are now waiting on Greencore’s next move. The Dublin-based business has said the planned acquisition would create a “leading” UK convenience food business with a combined revenue of around £4bn.
