Outlook: Terranova Foods

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The Independent Online
YOU HAVE to go back to Tomkins's bid for Ranks Hovis McDougall in 1992 for the last hostile bid in Britain's none-too-exciting food sector. We've got another one now, but sadly Unigate against Terranova Foods hardly has the look of a ding-dong battle. First, it is relatively small at less than pounds 230m. Second, it is unlikely to go the full distance.

We've been here before, of course, though the names have changed a bit in the past few months. It was only last autumn that Unigate had a pounds 1.6bn dalliance with Hillsdown Holdings. It didn't much fancy the whole package, you understand, only one of its attributes. It was the chilled foods operations that led it to make an approach for the whole of the Hillsdown beast before eventually being frightened off.

The division was therefore always bound to be vulnerable after being spun off in October as Terranova Foods, and so it has proved. Unigate had a go at an agreed deal at the weekend, but was rejected. Now it is a case of third time lucky. Or so it hopes.

What all this proves is that Unigate is as keen as mustard to buy this business. It wants Terranova's European interests to add to its own, while Terranova's Buxted chickens would make a neat fit with Unigate's Malton pig business. Add to this the target's M&S sandwich supply business, and it looks a very tasty morsel.

It won't win the prize at this price, though. Terranova has hardly been a stellar performer as a quoted entity, but Unigate's 125p-per-share offer gives it a measly exit multiple of 14. The rise in Terranova's share price to 135.5p means Unigate must go higher.

Analysts reckon that around 150p would win the day, which would certainly suit Phillips & Drew, which was buying the stock heavily at around 90p as recently as January. For it to get more exciting than this would take a rival bidder to emerge. So far, Tomkins is the only name in the frame.