Business Opinion:Shareholders in Greencore must have been a little taken aback last Tuesday to discover that the company now plans to reinvent itself as a property developer.

David Dilger, the Greencore chief executive, has come in for more than his fair share of criticism over the past 10 years or so as he sought to plot a course to take Greencore away from sugar processing and into something offering a more sustainable, long-term future.

And there have been a number of costly wrong turns along the way, the most spectacular being the failed venture into the US sugar market via Imperial Holly in 1996. But the purchase of Hazlewood Foods in 2000 set the company on the road to what - until last week - looked like its ultimate destiny; the consumer food business.

Being one of the UK's largest sauce and sandwich makers may lack glamour, but at least it appeared to shareholders to be the logical result of a long - and some would argue - expensive process.

The next stage in this process is the orderly exit from sugar processing as part of an EU-sponsored restructuring. Brussels made €145 million available in compensation for Irish producers, the lion's share of which will flow to Greencore, although the exact divvy up is the subject of legal wrangling between Greencore and the Government.

Shareholders might have been forgiven for thinking the money will be used to fund further expansion of Greencore's core business. But it now appears more likely that the funds will be earmarked for the group's sortie into property development, an area in which its track record is pretty much non-existent.

But do Greencore shareholders really have any right to feel surprised, or even misled? The future - and the development value - of Greencore's former factory sites quickly became a live issue once the final exit from sugar production was signalled last year. The company steadfastly refused to speculate on what they were worth, but the expectation was that they would be disposed off at a significant profit.

Indeed, according to reports from the time, Dilger was telling investors at a conference organised in New York by Davy last March that their sale would raise multiples of the book value.

But a few months later - at the time of the interim results - Dilger started talking in terms of adding to asset value and income streams when asked about his plans for the sites. What was proposed last week is certainly not inconsistent with that statement, although most people had chosen to interpret Dilger's comments as meaning the group would seek to have the sites rezoned before disposing of them.

But as the company made clear last week, it plans to redevelop the sites itself. And it is quite happy to shoulder all the risk that this entails. It has put forward its plans for a new €1 billion town centre in Carlow and something similar is in the pipeline for the site in Mallow. Another large site in the UK is also a candidate for redevelopment.

Something appears to have happened between last March and now to make Dilger change his mind and the obvious explanation is the arrival of property developer Liam Carroll on the share register.

Carroll bought Dermot Desmond's 21.5 per cent stake in the company last summer and has been sitting quietly in the wings ever since.

But the presumption is that he is interested in the former sugar factory sites and in time will make his move, with a bid for the company being the obvious route.

In that context, the decision by Greencore to develop the sites itself seems to make a bit more sense as it may well serve to force Carroll's hand. And if it does, the board will be better placed to rebuff any hostile offer that involves breaking up the company as it will be able to point to a clear strategy for the sites, which they can argue will deliver a better return for shareholders than a break-up or straight sale.

But this still does not get around the issue of whether it is a good idea for Greencore to get into property development. And it is pretty clear that the market does not seem to be enthusiastic about the idea and more pertinently also doesn't really think it is going to happen, despite all of the bullish talk from Greencore management last week.

Greencore shares were pretty flat in the aftermath of the announcement of the company's plans for the Carlow site, but they started to move towards the end of the week, closing at €4.25.

But even at that level, the peaks hit in the aftermath of Carroll buying in. Last summer's price and presumably the current price are factored on Greencore selling the sites - most likely to Carroll - and getting on with making sandwiches.

jmcmanus@irish-times.ie