LONDON (ShareCast) - (Sharecast News) - Convenience food manufacturer Greencore Group has struck a deal to sell its entire US business for $1.1bn (£817m) and return a chunk of the cash to shareholders.
The Dublin-headquartered, FTSE 250-listed outfit said it would return £509m, or 72p per shares, of the £802m net proceeds, if they approve the deal. The remaining £293m cash will be used to pay down debt.

Greencore is selling the US business, including the $747.5m acquisition of Peacock Foods which it only completed in December 2016, to Hearthside, an Illinois based contract manufacturer that was recently acquired by Charlesbank Capital Partners, the same company that sold Peackock to Greencore two years ago.

Challenges in the US market had led Greencore to issue a profit warning in March this year, which was blamed on the weak performance of its underutilised non-Peacock sites. Recent third-quarter results showed revenue in the original part of the US business decreased by 25.2% due to volume declines, while Peacock growth accelerated to 19.4%.

The US business made £503.6m and £12.6m operating profit in the first half of 2018 and £881.3m and £33m operating profit in the last full year. Greencore said the total proceeds of the deal represent 41% of the group's estimated enterprise value, and the £817m value of the transaction is 13.4 times the level of full year adjusted EBITDA, the company said, or 14.2 times when allocated central costs are included.

Chief executive Patrick Coveney said the proposed sale "represents a compelling and immediate realisation of value" for shareholders. "We have always had a firm conviction on the underlying value and growth prospects of our US business and believe that this offer fully reflects that."

By selling off the US business, Greencore will focus on its core UK market, primarily focused on the convenience food sector.

"Looking ahead, we are confident that we can deliver further growth and returns in the dynamic UK market. The proposed transaction would enhance our strategic and financial flexibility, which would allow us to build on our industry-leading position in our core UK market whilst also taking advantage of emerging organic and inorganic growth opportunities."

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