Bakkavor (#BAKK) - Bread & Spread

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Recommended Acquisition of Bakkavor

Today its been announced that Greencore (LSE:GNC) is acquiring Bakkavor (LSE:BAKK)for a total consideration of circa £1.2BN, with BAKK shareholders receiving;

  • 85p Cash

  • 0.604 New Greencore Shares (at the time of writing = 187p. So 112.94p)

  • 1 Contingent Value Right (US Sale Special Dividend - exceeds an amount equal 9x EBIDTA) -

  • Dividends

Greencore Shares

Any sale which you're acquiring shares of another business is always subject to go in your favour or not. Greencore might have company specific problems, such as a profit warning, or wider-market movements such as the on-going concerns about US tariffs.

  • BAKK should take some solace that RNS dated 15th May has GNC upgrading FY guidance.

Contingent Value Right (CVR)

As part of the deal, BAKK shareholders have a potential to receive cash based on BAKK selling their US operations. Any price achieved above 9x EBIDTA will be paid to BAKK shareholders as way of a special dividend.

To work out the 1 Contingent Value Right, I'll look at BAKK recent sale of their China Operations.

  • In RNS dated 29th April, BAKK sold their China Operations for £50M. In FY24, EBIDTA was 4.3M so 11.6x.

  • FY24, US had EBIDTA of 21.6M. If they sold on the same calculation, then total value would be circa £250M. If sold at 9x EBIDTA, value would be £194.4M. This implies a potential difference of circa £55M.

  • FY23 Final Dividend cost BAKK £25.3M / 4.37p a share. Therefore, if the sale was to proceed based on similar terms to their Chinese operations, then an additional circa 8.7p a share.

HOWEVER, some obvious cavaets;

  • The US sale might not happen.

  • The $ has weaken against the £ in recent months, and therefore any sale might affect the overall EBIDTA figures.

  • Net Assets held within each operation. China Had Net Assets of £39M at the time of sale. I can't see any reference in FY24 report the allocation of Net Assets per region. However, it does state Total Assets.

  • In FY24, China had Total Assets of £56.9M and US had £185M. Reviewing this, then £250M might feel a stretch.

Dividend

If the deal isn’t finished by certain dates, Bakkavor can pay its shareholders dividends as follows:

✅ If the deal isn't completed by 31 January 2026:

  • Interim dividend (for the first half of 2025):

    • Up to 75% of adjusted earnings per share

    • Cap: Max 3.20 pence per share

  • Full-year dividend (for all of 2025):

    • Total (interim + full year) can't be more than 75% of 2025 adjusted earnings

    • Cap: Max 5.20 pence per share

    • Must follow Bakkavor’s normal dividend schedule

✅ If the deal isn't completed by 31 July 2026:

  • Another interim dividend (for the first half of 2026):

    • Again, up to 75% of adjusted earnings

    • Cap: Max 3.53 pence per share

    • Must follow normal timing

Final Potential Value

Cash

85p

Greencore Shares

112.94

CVR

8.7

Dividends

8.4

Total

215p

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