GREENCORE’S PROPOSED merger with Northern Foods was left in disarray last night after a company controlled by British chilled food magnate Ranjit Boparan made a cash offer for Northern Foods.

In a dramatic reversal of its stated policy in recent months, Northern Foods withdrew its support for the Greencore merger and has accepted the counter-bid. It is now recommending that shareholders vote in favour of Mr Boparan’s 73p a share cash offer.

Greencore said it noted the announcement and that it was considering its options.

Greencore is now entitled to receive a break fee of £1.83 million as a result of Northern Foods withdrawing its recommendation for the proposed merger and announcing an alternative transaction.

Greencore and Northern Foods had also agreed to share equally the fees, costs and expenses incurred in relation to advice obtained for the “joint benefit” of the companies for the proposed merger.

Withdrawing its support for the deal last night, Northern Foods said the cash offer “provides shareholders with an immediate premium to the value of Northern Foods within Essenta Foods”.

It said the bid from Mr Boparan was “a compelling opportunity for our shareholders to realise a cash exit . . . as such the board of Northern Foods will be unanimously recommending that Northern Foods shareholders accept Boparan’s offer”.

The 73p offer represents a 61.3 per cent premium to Northern Foods’s closing share price of 45.3p per Northern Foods share as at November 16th, the last day before the announcement of the proposed merger.

The bid values the company at £342 million (€402 million).

Yesterday’s counter-bid came at the end of a dramatic day during which Mr Boparan’s 5pm deadline was extended until 7pm by the British takeover panel.

At 7.30pm last night, a joint statement was then issued by Northern Foods and Boparan, outlining the terms of the offer and Northern Foods’s support for it.

It is believed that Mr Boparan held discussions with the pension trustees of Northern Foods right into yesterday.

Northern Foods’s £142 million pension deficit was seen as a key barrier to Mr Boparan’s takeover of the company.

Under the Greencore deal, the Irish company would pay £15 million each year into the deal.

Analysts expressed concern about whether Mr Boparan, whose companies already have a significant level of debt, could raise the finance for the acquisition.

A spokesman for Mr Boparan declined to comment on the financial arrangements behind the multimillion pound offer.

However, the fact that Mr Boparan’s bid was a cash offer appears to have been his winning card, trumping Greencore’s all-share offer.

The 73p offer is to the higher end of the scale that some commentators were predicting.

Mr Boparan now has 28 days to send out the offer document to Northern Foods shareholders, who will then vote on the proposed deal.