Bakkavor Group buys Geest for $928 Million
Bakkavor Group hf, an Icelandic food supplier, agreed to buy Geest Plc, a U.K. provider of salads and prepared meals, for 485 million pounds ($928 million) to become Britain's biggest supplier of freshly prepared food.

Bakkavor, which employs about 2,000 people in the U.K., will pay 655 pence a share, Geest Finance Director Mark Pullen said today on a conference call. That's 9.2 percent more than the closing price on Dec. 8, the day before Geest announced it had received a preliminary proposal from Baugur. The enlarged group will have sales of more than 1 billion pounds and control 11 percent of the country's freshly prepared food market.

Bakkavor is increasing the size of its U.K. business to tap demand for convenience food, worth 23 billion pounds a year and one of the fastest-growing parts of the food-retailing market. The acquisition of Geest is the latest in the U.K. by an Icelandic buyer. Baugur Group HF, the Scandinavian country's biggest retailer, owns U.K. grocer Big Food Group Plc as well as Hamleys toy stores, Oasis fashion chain and Goldsmiths jeweler outlets.

``This is a pretty good deal and will make the company a strong player in what is quite a lucrative market,'' said Paul Mumford, who oversee the equivalent of $550 million at Cavendish Asset in London and owns Geest stock. ``It's a competitive market and the company will be well-placed to meet future challenges.''

Special Dividend
Shares of Geest rose 7 pence, or 1.1 percent, to 653 pence in London. The stock has climbed 26 percent since May 2004, when Bakkavor began increasing its stake in Geest. Investors will receive a special dividend of 7 pence a share.

Barclays Plc, the third-largest U.K. bank, is arranging senior debt financing for the acquisition, Bakkavor said. The deal will comprise about 500 million pounds of loans, said Fiona Tooley, a spokeswoman at Bakkavor's public-relations firm.

The market for freshly prepared food is growing as increasingly busy lifestyles leave people with less time to prepare meals. U.K. shoppers spend about 20 percent of their food and drinks budget at convenience stores.

Both Geest and Bakkavor supply food such as salads to Britain's two largest grocers, Tesco Plc and Wal-Mart Stores Inc.'s Asda. Bakkavor owns four factories in the U.K. Pullen said he doesn't expect any large-scale redundancies resulting from the acquisition and Geest Chief Executive Gareth Voyle, will remain in his position and run the newly formed company.

Lower Earnings
In a separate statement today, Geest said annual profit dropped 2.9 percent as competition among food retailers increased pressure on prices and its business which sells bouquets of flowers, lost its main customer.

Net income fell to 25.4 million pounds or 34.2 pence a share, in the 52 weeks ended Jan. 1, from 24.5 million pounds, or 33.2 pence, a year earlier, Pullen said. Sales dropped 4.3 percent.

Marks & Spencer has been in talks with suppliers to reduce buying costs by at least 100 million pounds and enable it to lure more customers into stores with cheaper prices. Geest was forced to cut selling prices by 2 percent last year to retain contracts.

Geest saved 24 million pounds in the past year by cutting jobs and combining units to reduce costs as Geest's customers seek to negotiate better buying terms.

``The retail market is becoming increasingly competitive, and the issue of prices will continue to dominate the grocery environment,'' said Pullen. ``We will continue to generate savings from our improvement program, which would stand us in good stead to manage pressure on margins.''

Geest will continue to grow its fresh prepared foods business, which has seen sales rise 6 percent in the past year, the company said in Regulatory News Service statement. The food producer gained 30 million pounds of new business in 2004 which will benefit sales levels in 2005, it added.

Geest was founded in 1935 to develop the sale of bulbs. It diversified into fresh produce in the 1940s and established a commercial banana industry in the 1950s through its shipping subsidiary, Geest Line, which transported bananas from Caribbean. The company was floated on London's Stock Exchange in 1986.

Source