The US has not proved to be the land of opportunity for Greencore (GNC). The convenience food company is selling its American business less than two years after it had promised to expand its presence there. While this may be a disappointment to some investors from a strategy perspective, the company has done well to recover money spent in the US. Its American division has been sold to Hearthside Food Solutions for $1.08bn (£82m) in cash, equating to 14.2 times FY2017 cash profits. Analysts at Jeffries estimate that this recoups the $950m cumulative US investment, including $758m spent on the acquisition of Peacock Foods in November 2016, plus around $100m in profit.
Around £509m of the proceeds will be used to pay a one-off special dividend of 72p, while the remaining £293m will go towards paying down debt. As a result of the transaction, Greencore will return to its heritage as a UK convenience foods company. Jeffries analysts estimate shareholder dilution of up to a fifth to around 11.6p, with a reduction in net debt to cash profits from 2.3 times previously to 1.3 times post-deal.
