Greencore has brought its spending on acquisitions in Britain this year to well over £100 million with the purchase of the publicly-quoted Paramount Foods for £28.2 million sterling (£33 million). Paramount's £6 million debt brings the total cost of the acquisition to £40 million.
Paramount manufactures pizza crusts for the British and international markets and is also a supplier of topped pizzas to the multiples. This part of the Paramount business will fit in with Greencore's Kears bread and baked products business, while Paramount's Meridian subsidiary, which manufactures sauces, dips and marinades, fits in with the Erin Foods dry sauces and mixes business.
Greencore's chief executive, Mr David Dilger, described Paramount as an excellent bolt-on acquisition for two of Greencore's subsidiaries. "The Meridian wet sauces business is a super complement to Erin's dry products, and we see good opportunities to share brands and technologies. The pizza business complements Kears. We have one of the most competitive bakery businesses in the UK in Kears, while Paramount has been very good at sales/marketing and new product development."
Although Paramount management abandoned its own buyout proposal when Greencore came in with its 150p sterling a share bid, Mr Dilger said that the management will all be staying on under the new owners. "They are all key people and they are all happy to stay on," he stated.
The Paramount board - which had previously tried to put together the management buyout at 135p sterling a share - has now given its backing to the Greencore offer of 150p. Greencore has also got irrevocable acceptances for its offer from the main institutional shareholders even if a third party comes in with a higher offer.
The fact that Paramount shares traded no higher than 144p sterling yesterday indicates clearly that the market expects no third party to appear.
Although it is comparatively small, analysts welcomed the Paramount acquisition as a further move by Greencore away from its dependence on sugar and into added-value foods in Britain. Goodbody analyst Mr Liam Igoe said the price was "reasonable" at less than nine times Paramount's forecast 1998 operating profits of £3.9 million sterling and a multiple of 13 times last year's earnings per share. He added that the acquisition will add about 0.5p to Greencore earnings in the first year.
Last year, Paramount increased its sales from £22.8 million to £28.5 million with pre-tax profits up from £2.1 million to £2.5 million. Earlier this year Greencore made its biggest acquisition when it bought the British maltster, Pauls Malt, for £73 million. Despite that acquisition, Greencore will have debt of less than £60 million even after completing the Paramount deal and taking on Paramount's debt. That represents a gearing of little more than 20 per cent and will not impair Greencore from making further, sizeable acquisitions.
