Two Icelandic brothers who have been living in the UK for four years bought prepared food maker Geest yesterday for £485m. It creates a business that will rival Northern Foods as the country's biggest ready-to-eat meals group.
Agust Gudmundsson, executive chairman of Bakkavor, the Icelandic-listed company making the acquisition, pledged there would be no redundancies as a result of the deal, which will combine Geest with Katsouris, the UK dips business he bought with his younger brother, Lydur, two years ago.
The transaction continues the trend of Icelandic companies buying in Britain although Geest will have to pay a near-£2m break fee should the deal fail to complete by May as planned.
Big Food Group was recently sold to Baugur, the Icelandic company which already owns toy shop Hamleys and clothing group Karen Millen.
As a result of the transaction Geest's chief executive, Gareth Voyle, will receive a pay rise from £345,000 to £500,000 in return for giving up his bonus scheme at Geest. Mr Voyle is the only confirmed member of the existing management team to be given a role in the combined group. Finance director Mark Pullen sidestepped questions about whether he would be staying.
The new owners are also putting up to £2m aside to retain the top 55 managers of Geest, as well as maintaining the terms of a long-term incentive plan by releasing 280,371 shares worth £1.8m at yesterday's offer price of 655p a share.
Under the terms of the cash deal - which Bakkavor is funding with £500m of debt - Geest shareholders will receive a 7p special dividend. The transaction is a major deal for Bakkavor, which is valued on the Reykjavik stock exchange at barely £400m.
Mr Gudmundsson is now 40 but was 22 when he started Bakkavor as a fish company in Iceland. He said Icelandic companies were picking the UK because they had run out of growth domestically and because of the language. "All the Icelandic population speak fluent English and the attitudes of the two countries are quite similar."
As well as believing Britain is a good place to do business, he said he liked living in the country. "I don't understand why the British are buying homes in Spain. To me [this is] heaven."
Mr Gudmundsson, however, ruled out moving Bakkavor's listing from Reykjavik to London. "It is much better for us to be a big fish in a small pond." The combined business will have an 11% share of the fresh convenience food market.
Geest's results yesterday showed that profit from underlying operations fell 4% to £40m in 2004 while sales fell 2% to £830m.