Bakkavor CEO Mike Edwards

Mike Edwards said the divestment would help ‘sharpen focus’ on Bakkavor’s core business

Bakkavor completed the sell-off of its Chinese business on Friday (11 July), 20 years after it established operations in the country.

The cash sale – for CN¥509m (£50m) –  is expected to make Bakkavor a net profit of at least £18m, given the Chinese business’s valuation at around £32m in late June, and would help “sharpen focus” on the core business, according to CEO Mike Edwards.

Proceeds from the transaction will be used to reduce the group’s leverage further after it cut operational net debt by £35.8m in 2024, to £193.8m. As of its December 2024 accounts, the group had slashed its leverage ratio to 1.1 times EBITDA.

Bakkavor said the sale would also support the company’s efforts to reach a target margin of 6% adjusted operating profit, having achieved 5% in 2024.

Bakkavor’s £116.5m-turnover Chinese business had posted consecutive losses since 2021 thanks to stringent local lockdown measures. Strategic divestments and market-beating growth in retail sales allowed the business to cut losses from £6.6m to £1.5m over two years, with strong like-for-like sales growth.

The purchaser, Lihoo’s (Qingdao) Food Industry Company, has now taken control of Bakkavor China Holdings through a subsidiary.

“After more than two decades in China, we are incredibly proud of the business we have built and I would like to thank our colleagues for their contribution, and for their commitment in continuing to deliver excellent service for our customers throughout this process,” Edwards said.

“We are confident of the business’ continued success under Lihoo’s ownership, benefiting from their local expertise as it embarks on the next phase of its growth journey. The group’s strategy remains clear, and the exit from China enables us to sharpen our focus on our core business and support the delivery of our medium-term margin target.”

The vast majority of Bakkavor’s business is UK-based, with UK revenues of £1.9bn dwarfing its US operation’s £227.7m of turnover. It supplies soups, salads, ready meals, pizzas and desserts to all major supermarkets.

The group as a whole is being acquired – pending an upcoming Competition & Markets Authority investigation – by rival food-to-go company Greencore, for £1.2bn. It had rebuffed two previous offers from the business. Interested parties currently have until 22 July to submit comments on the mega-merger to the CMA.