Stockbroker ABN-Amro has questioned the ability of the Greencore board to reinvest its sugar and agribusiness revenues into higher growth categories - as IAWS has successfully done.

In a detailed note on the Irish food sector, analyst Ms Rebecca Wood says that while Greencore has most of the ingredients to replicate the IAWS model "an increasingly conservative management style raises questions as to whether the company can deliver here". The ABN-Amro report suggests that a merger between IAWS and Greencore could produce synergy benefits of €10 million and, while there are many advantages to a merger of the two groups there are also some serious disadvantages.

These include: the lack of growth momentum in most of Greencore's business; the limited product overlap between the two groups, and the large co-op shareholding in IAWS.

With regard to a merger with IAWS, the report does not mention the shareholding situation in Greencore where financier Mr Dermot Desmond has built up a stake of more than 10 per cent and who has been suggested as a prime mover in any major corporate moves at Greencore. It does state, however, that if Golden Vale does sell its dairy interests - as has been mooted in recent months - then Mr Desmond's stake in both Golden Vale and Greencore could be instrumental in putting together such a deal which "would be a good fit for Greencore".

The report also states that the large valuation differential between the two groups - 20 times earnings for IAWS against 7.5 times for Greencore - would make it difficult to agree terms and that this was the reason why Greencore spurned the tentative merger approach from Fyffes.

But Ms Wood also believes that there are significant advantages: the positive effect on ratings for the merged group; the esteem in which IAWS management is held and the dependability of Greencore's sugar cashflow for reinvestment into higher growth sectors.