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Food manufacturers Greencore and Bakkavor have agreed on the terms of their £1.2bn acquisition deal, which will create a convenience food business with a combined revenue of £4 billion.

The two companies’ boards have agreed on Greencore’s takeover of Bakkavor, which will see Bakkavor shareholders entitled to 0.604 new Greencore shares and 85p in cash per Bakkavor share held. The final deal values each Bakkavor share at £2, implying that Bakkavor’s entire issued and to be issued share capital is valued at approximately £1.2 billion.

After an initial agreement in principle for a potential £1.2bn deal was announced in early April, the deadline by which Greencore was required to either announce a firm intention to make a formal offer, or confirm it did not intend to make one, was extended – first to 11 April, and a second time to 11 May.

This followed three previous takeover bids from Greencore, which made its first proposal to acquire Bakkavor on 25 February. Bakkavor’s board rejected this two days later, leading Greencore to approach the group with a revised offer implying a total equity value of £1.14 billion. Bakkavor's board unanimously rejected this proposal on 10 March.

In a statement shared today (15 May) announcing the finalised decision, the boards of Greencore and Bakkavor said the combination will drive ‘significant benefits’ for both companies’ customers and colleagues, creating a ‘homegrown UK manufacturing business with a diverse product offering and strong commercial relationships’ across the nation’s convenience food landscape.

Greencore’s CEO, Dalton Philips, commented on the announcement: “We are bringing together two experienced teams, and our complementary portfolios will drive benefits for customers and consumers across the UK”.

“The combined group will be able to invest more in innovation and product development, ensuring we can provide the consumer with greater food choices at more points in the day and bringing together Greencore’s ‘food for now’ expertise with Bakkavor’s ‘food for later’ portfolio.”

Chair of Bakkavor, Simon Burke, said: “Having considered a combination previously, we believe that this transaction now proposes terms that we consider are very attractive to Bakkavor’s shareholders”.

“The transaction offers shareholders a significant premium, with an attractive combination of cash on completion and the ability to participate in the future value creation anticipated from bringing the two businesses together. For this reason, our board is unanimously recommending it to shareholders.”

UK and Ireland trade union, Unite The Union, has expressed concerns about the deal in a statement. Unite's national officer for food, Bev Clarkson, said: "Both [companies] have a history of paying poverty wages to employees and less competition in the marketplace is likely to lead to long term wage stagnation and potential redundancies."

Clarkson added that the acquisition could also be bad news for consumers, with less competition in the market likely to lead to higher costs at a time when food prices are already rising.

She continued: "Unite is calling for an urgent meeting with both companies’ management teams to address these issues and we will be supporting our members throughout this process".