Coveney (pictured), currently CEO of Greencore, and Northern finance chief Simon Herrick, who will become CFO of the new Essenta Foods, said they had been working "flat out" since late August to land the deal, because it ticked a lot of boxes both in terms of timing and the synergies of the two companies.
Essenta, which will be based in Dublin and listed on the London Stock Exchange, will boast sales of £1.7bn. As both Northern and Greencore currently have sales below £1bn, Coveney said this represented a "big, big step up". The new company will become a FTSE 250 company, a move that he said was material, not simply because of increased scale but "scale in the right places".
Coveney explained that while the businesses operated in many of the same areas, such as frozen pizza and chilled ready meals, they did not compete for the same customer in many areas and so their combined own-label offers were complementary. Thus they could retain sales while driving efficiencies through combining supply.
The merger is expected to deliver £40m of cost savings, half to be delivered in year one. This will be made up of £15m from overhead cost savings, £20m from purchasing and supply chain improvements and £5m from financing and tax efficiencies.
The savings were a conservative estimate, said Coveney, arguing that the major benefit would be from increased sales the group would be able to achieve, particularly in the fast-growing food to go and chilled ready meals areas.
Herrick added that the new company would be on a particularly sound financial footing, having agreed a £450m five-year revolving debt policy, which would put Essenta in the "comfort zone", he said. "We have a fantastic finance package. To get a five-year deal is almost unheard of."
Northern's shares jumped 10.75p to 56p and Greencore was up 21% to 1.26 on the news.
Northern Foods CEO Stefan Barden will not have a role in the new company, but with the deal subject to approval, a date for his departure had not been set, Coveney added.
Barden is edged out at Essenta
To some, Northern Foods CEO Stefan Barden has been a hero, saying no to countless retailers over price cut demands.
To one rival, however, the resulting shuttering of sites such as Grantham, Swansea and Hull was "a game of poker that didn't pay off". Famed for his love of management consultants, "he's upset a lot of people".
But Patrick Coveney, who takes the top job at Essenta, paid tribute to Barden's role in the deal, saying "Stefan was committed to the interests of Northern's shareholders throughout".