Bakkavor, one of the UK’s biggest suppliers of ready meals, pizzas and salads to the major supermarkets, is preparing for a stock market flotation in the next few weeks that will value it at up to £1.5bn, The Grocer can reveal.
The group, owned by Icelandic brothers Lydur and Agust Gudmundsson alongside US hedge fund Baupost, will formally announce an intention to float on the London Stock Exchange within the next few weeks.
Bakkavor had pencilled in Monday 9 October as the original date to reveal its plans, but The Grocer understands this is now more than likely to happen in the middle of the month. The float would go live about six to eight weeks later.
Early indications suggest the ready meal supplier to the likes of M&S, Waitrose, Sainsbury’s and Tesco is hoping to raise at least £400m, made up of £100m of fresh funds to be injected by the banks managing the share sale process and £300m from existing shareholders selling down shares.
It is understood that 40% of the company will end up in public hands in the free float, but this figure could move up or down depending on investor interest and how much the Gudmundssons and Baupost are willing to sell.
It is not known who Bakkavor has lined up to take seats on the board of the newly floated firm, but an independent non-executive chairman, along with a number of non-executives, would be announced, City sources said.
“Bakkavor needs to be seen that it takes corporate governance seriously to address concerns stemming from past legal problems following the financial crisis in Iceland in 2008”, one source added.
The business has already appointed Denis Hennequin and Simon Burke, who have extensive executive experience on boards of listed companies, McDonald’s and Hamleys, as non-executives in December 2016. Lydur Gudmundsson will retain a seat on the newly formed board, with brother Agust remaining as CEO.
Media speculation about the IPO, which would be the biggest food & drink float for some time, dwarfing recent offerings from Hotel Chocolat and Fever-Tree, surfaced in January this year, with Bakkavor playing down the possibility.
The chilled food giant hired a team of advisers last year to start work on the IPO, including HSBC and Morgan Stanley, as well as bankers at Rothschild, Barclays, Citigroup, Rabobank and stockbroker Peel Hunt.
The flotation will represent a remarkable turnaround for Bakkavor, which was on its knees after the 2008 financial crash.
Excessive borrowing from Iceland’s banks to fuel an acquisition spree in the UK ready meals market, including the transformative £485m acquisition of Geest (which added about £800m to sales in 2005), left Bakkavor on the verge of collapse when the Iceland went into meltdown.
The Gudmundssons’ stake was greatly reduced following a restructuring in 2010 – and a delisting from the Iceland Stock Exchange – but creditors left the pair in charge.
The brothers retook control of Bakkavor in January 2015 after teaming up with Baupost to buy back the 51% held by Icelandic financial institutions, in a deal understood to be valued at £163m.
It is understood the Gudmundssons will sell down some their holding in the IPO while retaining control, with Baupost seeking to cash in on its investment.
Bakkavor today employs 18,000 staff at 50 sites across the world, with the majority in the UK, generating EBITDA of £145m on revenues of £1.7bn in 2016.
The group is the sixth largest supplier in the UK food and drink industry, according to the latest OC&C annual survey published this week.
Bakkavor declined to comment.