as at 18:19 fr21 Jan 2011 18:50
LONDON, Jan 21 (Reuters) - Businessman Ranjit Boparan is close to makinga cash offer for Northern Foods at a significant premium to Friday's closing price, a source familiar with the situation told Reuters.
The news came ahead of a move by Britain's Takeover Panel to extend the deadline for chicken entrepreneur Boparan to either make a bid or walk away by two hours to 1900 GMT on Friday.
Shares in Northern Foods, the maker of Goodfella's pizzas and Fox's biscuits, closed on Friday at 63 pence, up 4 percent, valuing the business at just under 300 million pounds ($477 million).
'Boparan is close to making a cash offer at a good premium to Friday's closing price. However, there are still some issues over funding to be resolved,' the source said.
The source said the possible offer was, however, below the 75 pence per share level that some analysts have said would be necessary to get the backing of the Northern Foods board and shareholders.
Earlier on Friday, sources familiar with the situation told Reuters that Boparan, who also owns the Harry Ramsden's fish and chips chain, had reached an agreement with trustees of Northern Foods' pension scheme, potentially clearing the way for him to bid for the company.
One of the two sources said the deal would see over 15 million pounds ($23.8 million) paid into the scheme each year if a takeover by Boparan were to succeed.
'An agreement has been struck between Boparan and the trustees which would enable Boparan to proceed with an offer for the business,' one of the sources said.
Boparan's original approach came after Northern Foods had agreed to merge with Ireland's Greencore to create a new company called Essenta Foods.
Northern Foods had agreed with its pension trustees to pay 15 million pounds each year into the pension fund, but the deal was conditional upon the Greencore merger going through. Boparan had needed to reach a separate agreement.
Greencore has offered to pay 0.4479 new shares per Northern Foods share, equivalent to around 50 pence per share at current prices and valuing Northern Foods at about 236 million pounds ($374 million).
Analysts had said Boparan would need to make an offer at a significant premium to Greencore's, reflecting the fact that the alternative of a highly complementary merger with Aunt Bessie's maker Greencore has the potential for significant cost savings and growth opportunities.
For his part, Boparan hopes the fact that any offer from him is likely to be in cash will prove attractive to shareholders, one of the sources said.
Shore Capital analyst Clive Black said he believed Northern Foods shareholders should demand a cash offer of at least 75 pence to discount the potential upside from the Essenta deal.
'If Boparan does not bid for Northern Foods we do think that the shareholders of the target remain in a sound position for further capital appreciation through the agreed and recommended merger with Greencore,' he add
Sign In
Follow the stocks
