Northern Foods, the maker of Goodfella's pizza and Fox's biscuits, is to merge with convenience group Greencore.
The combined business will be known as Essenta Foods, with each company’s shareholders taking a 50% stake in the new business.
Greencore chief executive Patrick Coveney will take the same role for Essenta, with Northern finance director Simon Herrick named CFO.
The companies expect to generate cost savings of £20m in the first year following the deal’s completion in the second quarter of 2011. Those savings could rise to £40m within three years, the companies said.
“The proposed merger is a great opportunity to develop fully the potential of both companies,” said Northern chairman Anthony Hobson.
“It will create a sustainable, top-tier organisation capable of delivering best-in-class food products and innovative solutions to its customers. We have a great executive leadership team, whose priority is to ensure that we work closely with our employees, our customers and our shareholders to integrate effectively and capture the huge opportunities available.”
“Essenta Foods presents a compelling opportunity for all stakeholders,” added Coveney.
“It creates a substantial chilled prepared food company in fast-growing categories, enhanced by strong branded positions in biscuits and frozen food. The time is right for both companies to build a real ‘better than both’ business.”
Meanwhile, Greencore today announced a 17.6% rise in profits for the past year to €59.7m (£50.7m). Group sales were up almost 7% to €856m for the year to 24 September.
Office axed in Northern cost-cutting drive (13 November 2010)
Restructuring costs push Northern into first-half loss (9 November 2010)
Northern shakes up divisional structure in drive for growth (9 October 2010)
Profits to rise a fifth, predicts Greencore (28 September 2010)