Bakkavor, a leading supplier of fresh products, is currently engaged in a takeover proposal from Greencore and has decided to sell its operations in China.
The transaction, valued at approximately £50 million ($66.9 million), involves selling the China business to Lihe Xing (Qingdao) Food Technology Co., a wholly owned subsidiary of Lihoo’s (Qingdao) Food Industry Company. This decision was announced today (29 April).
Bakkavor specializes in producing private-label ready meals, fresh salads, and dips. Notably, the deal includes seven manufacturing facilities across China.
Bakkavor China Holdings supplies retail and foodservice channels with a variety of products, including salads, ready meals, and sandwiches. Last year, this division generated revenue of £105 million and employed around 2,300 people across its factories.
“Over the last two years, Bakkavor has made significant progress in simplifying its operations in China. As part of its previously stated review of strategic options, this sale completes the group’s exit from the region,” the London-listed business stated.
CEO Mike Edwards emphasized, “With strong foundations in place, we are confident that going forward the business and its stakeholders will benefit from Lihoo’s local expertise and experience as a frozen and fresh meal manufacturer.”
He further expressed gratitude, stating, “Over the last 20 years, we have built a great business in China, and I would like to thank all our China colleagues for their contribution to the significant progress we have made in recent years.”
This transaction awaits regulatory approval in China. If granted, the deal is expected to finalize in the second half of this year.
Bakkavor disclosed that as of the end of December, the carrying value of its assets in China was £39 million, predicting a net profit from the disposal around the £15 million mark.
The China operations have been historically dilutive to the company’s adjusted operating profit margin. However, Bakkavor is pursuing a medium-term margin target of 6%. The margin stood at 5% in 2024, marking a 70 basis point increase from the previous year, as revealed in March during the annual results release.
Adjusted operating profit rose by 20.5% to £113.6 million, based on total group revenue of £2.29 billion, reflecting a 4% growth compared to the preceding period.
Adjusted EPS increased to 12.3 pence, compared to 8.8 pence from the previous figures.
Meanwhile, Greencore received an extension to finalize its bid for Bakkavor earlier in April, with the UK Panel on Takeovers and Mergers approving the request until 9 May.
Greencore first approached Bakkavor in March, but faced two rejected offers. A revised offer for a proposed £1.2 billion deal was preliminarily agreed “in principle” by the boards of both companies.
Markets are now closely monitoring Greencore’s next steps. The Dublin-based company has stated that this acquisition could create a “leading” UK convenience food enterprise, boasting a combined revenue of approximately £4 billion.
