DAVY VIEW

Greencore has confirmed that it made two proposals to listed peer Bakkavor for a cash-and-share offer, both of which were rejected. While unexpected, we see the acquisition as broadly aligned with the growth strategy outlined at Greencore’s recent Capital Markets Day. We expect synergies to be fully cost-driven, leveraging management’s recent track record in cost optimisation. Given the sizable cash component, striking a balance between earnings accretion with financial risk will be key. Our initial analysis suggests c.low-double-digit (LDD)% EPS accretion by FY27, underpinned by c.£50m in assumed total cost synergies. Our pro-forma valuation derives a pre-synergy EV/EBITDA multiple of c.7.5x (c.6.5x post-synergy). Our initial assessment indicates that the proposed acquisition could deliver a beneficial outcome for shareholders.