Sandwich maker Greencore abandons U.S. ambitions with $1 billion disposal

DUBLIN (Reuters) - British sandwich maker Greencore Group GNC.L has agreed to sell its entire U.S. business for a little more than $1 billion, it said on Monday, abandoning the market only two years after spending heavily in an effort to quadruple sales there.

Greencore spent $750 million on convenience food manufacturer Peacock Foods in 2016, saying the deal would give it “real scale” in the United States.

But in May it said that U.S operations were weighing on profit and that it would review and refine its strategy and organisation.

On Monday it admitted that it was abandoning North America and would sell its U.S. operations to Hearthside Food Solutions for $1.075 billion.

“We are leaving because we got a really strong - I would say unique - offer for our business,” Chief Executive Patrick Coveney told Reuters.

“We received an unsolicited bid in late August which valued the business very strongly and we thought it was in the interest of shareholders to crystalise that value now rather than to deliver it over the next number of years.”

The company’s focus for the foreseeable future will be on driving growth in the United Kingdom, Coveney said, adding that he would be “careful and disciplined” about how he deploys capital.

Jefferies analyst Martin Deboo said the sale would allow Greencore to recoup its cumulative investment in the United States but that leaving so soon after scaling up “might result in some red faces”.

Greencore shares were down 2.8 percent at 1025 GMT.

The group’s U.S. business produces sandwiches, salads, sushi and deserts for customers including Starbucks and the 7-Eleven convenience store. Illinois-based Peacock produces frozen breakfast sandwiches, snack kits for children and salad packs, among other items.

Greencore said it would distribute 509 million pounds ($668 million) in cash to shareholders and aims to complete the deal by late November. There will be a Nov. 7 extraordinary general meeting to vote on the deal.

Activist investor Shareholder Value Management (SVM), which owns 5 percent of Greencore, welcomed the move.

“We think it’s definitely in the best interest of shareholders,” SVM director Gianluca Ferrari told Reuters.

Reporting by Conor Humphries; Editing by David Goodman