Tycoon pledges not to pay himself a Northern dividend

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FOOD tycoon Ranjit Singh Boparan has agreed not to pay himself a dividend from Northern Foods for three years if he succeeds in his £342m bid for the ready meals group.

The West Midlands poultry magnate gave shareholders until March 2 to accept his debt-funded bid, which offers 73p per share for the maker of Goodfella’s pizza and Fox’s biscuits.

The offer document posted to shareholders also reveals Mr Boparan has struck a deal with pension trustees to inject £15m a year into Northern’s pension scheme for the next 10 years – the same as the proposed Essenta Foods group would have paid – and significantly less than analysts were expecting. Northern had a £138.9m pension scheme deficit as of October last year.

Mr Boparan scuppered Leeds-based Northern’s agreed all-share merger with listed rival Greencore, which had intended to create a food giant called Essenta.

The entrepreneur, a major chicken supplier to the UK’s big supermarkets, plans to combine Northern with his 2 Sisters Food Group to create a £2bn turnover privately-owned food conglomerate with significant exposure to the UK’s supermarkets. He now holds 11.4 per cent of Northern’s shares.

The combined group would have 31 manufacturing sites and about 15,0000 staff. Mr Boparan admitted there may be “some job losses” from office closures and restructuring, but said no decisions have been made on cost cuts yet.

The acquisition will be largely funded with debt from Goldman Sachs, at a rate of five to six per cent above LIBOR (London Interbank Offered Rate).

Northern’s chairman Tony Hobson and non-executive directors will be asked to resign if the deal becomes unconditional. His bid has their backing.

Mr Boparan’s pension deal also includes a commitment not to pay himself dividends from Northern which are greater than its cash flow, nor pledge the group’s assets to any creditors without the trustees’ permission.

“The combined group will be able to build on the complementary strategies of both businesses from a position of significantly enhanced scale and efficiency, take advantage of top-line growth opportunities through innovation and brand investment and leverage best practices to deliver cost savings to enhance efficiency and competitiveness,” said Mr Boparan in his letter to shareholders.

Ireland’s Greencore has yet to say whether it will make a sweetened bid. Shares in Northern closed at 75.5p yesterday.