Businessman Ranjit Boparan has reached an agreement with trustees of Northern Foods' pension scheme, potentially clearing the way for him to bid for the company, sources familiar with the situation said.
One of the two sources said that the deal would see over £15 million paid into the scheme each year were any takeover of the maker of Goodfella's pizzas and Fox's biscuits by Mr Boparan to succeed.
"An agreement has been struck between Boparan and the trustees which would enable Boparan to proceed with an offer for the business," one of the sources told Reuters today.
Another of the sources said Mr Boparan's agreement with the trustees contained a number of conditions. "There is a lot of confidentiality as part of the pension deal," the source added.
Shares in Northern Foods rose as much as 3.7 per cent following the news which came after an earlier newspaper report that Mr Boparan had failed to reach a pension deal.
The chicken entrepreneur was under pressure to resolve the pension issue because he must either make an offer for Northern Foods by this evening or agree to walk away under a deadline set by Britain's Takeover Panel.
His original approach came after Northern Foods had agreed to merge with Greencore to create a new company called Essenta Foods.
Northern Foods had agreed with its pension trustees to pay £15 million each year into the pension fund but the deal was conditional upon the Greencore merger going through. Boparan had needed to reach a separate agreement.
Greencore has offered to pay 0.4479 new shares per Northern Foods share, equivalent to around 50 pence per share at current prices and valuing Northern Foods at about £236 million.
Some analysts have said any offer from Mr Boparan would need to be pitched as high as 75 pence a share, valuing the business at around £356 million, reflecting the fact that the alternative of a highly complementary merger with with Aunt Bessie's maker Greencore has the potential for significant cost savings and growth opportunities.
For his part, Mr Boparan hopes that the fact any offer from him is likely to be in cash will prove attractive to shareholders, one of the sources said.
Shore Capital analyst Clive Black said he believed Northern Foods shareholders should demand a cash offer of at least 75 pence to discount the potential upside from the Essenta deal.
"If Boparan does not bid for Northern Foods we do think that the shareholders of the target remain in a sound position for further capital appreciation through the agreed and recommended merger with Greencore," he added.
Reuters
