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Greencore to appoint US chief executive by year end

Greencore, the Dublin-based food group and the world’s largest sandwich maker, is searching for a new chief executive for its US operations as speculation persists about potential takeover interest in the company.

Sources said Greencore will announce the appointment before the end of the year.

News of the latest shake-up comes amid rumours the group has veered into the crosshairs of a private equity suitor.

It is understood Greencore has not fielded any takeover discussions or interest from third parties since late 2011, when the New York buyout firm Clayton Dubilier & Rice came knocking.

But speculation that private equity firms continue to circle flared up again last week across trading desks in London and Dublin, despite the share price rebound since a shock profit warning in March wiped a third off the group’s value.

At that time, Greencore’s chief executive Patrick Coveney announced he would spend half his time across the Atlantic as he sought to restore investor confidence and bolster business by adopting a more hands-on approach to the problem-plagued US division.

Chuck Metzger, chief operating officer of the unit, now holds responsibility for its day-to-day management.

It is not clear whether Mr Metzger is also in the running for the CEO appointment.

According to sources, Mr Coveney’s deeper involvement in the US arm was intended as a temporary measure and a replacement CEO to the US arm is expected to be unveiled within the next six months.

The looming top-tier changes come as investor sentiment in the stock continues to rally after the half-year results in May recorded a 22.6pc jump in revenue to £1.24bn (€1.41bn) – beating market forecasts. While the group chalked up an operating loss of £4.4m (€5.01m), the shares have climbed steadily over the past month, reversing the downward spiral.

The sharp improvement has prompted some to question why a suitor would table an offer now when the chance to swoop on the group at its weakest has passed.

Yet Greencore continues to draw a heavy contingent of short-sellers, who typically borrow stock in a company on the expectation it will fall in value.

In March the short interest climbed to almost 16pc. It has since retreated to 12pc but the group remains one of the most heavily shorted stocks on the FTSE 250 index.

Few in the market doubt private equity companies were crunching the numbers on Greencore earlier this year. Investor sources argue an opportunist may see value in breaking up the company, hiving off its profitable UK arm from the troubled US division.

Low cash generation also continues to weigh on Greencore’s value although many analysts predict this will grow over the next few years as the Peacock acquisition fuels profits.

The group snapped up the food manufacturing business, which caters to branded consumer behemoths like Tyson Foods, Kraft Heinz, Dole and Kellogg’s, for $747.5m (€635m) at the end of 2016, and investors backed the move with a £439.4m (€500.5m) rights issue. But the group has suffered a string of setbacks in its legacy business in the US as new retail ventures failed to gain much traction and factories were left under-utilised.

Greencore has picked up positive momentum recently and has recalibrated its US strategy. Yet Brexit poses considerable cost challenges while a potential supermarket consolidation in the UK threatens to undermine margins.
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