Bakkavor Group PLC on Tuesday said it has agreed to sell its operations in China to a local company, saying the disposal will improve group profit margin and proceeds will reduce debt.
London-based Bakkavor is a provider of fresh prepared food, such as salads and sandwiches, to the foodservice industry and retail customers, and its operations in China, under Bakkavor China Holdings Ltd, do the same.
The business is being bought for ¥500 million, about £50 million, by Lihe Xing (Qingdao) Food Technology Co Ltd, part of Lihoo’s (Qingdao) Food Industry Co Ltd.
The carrying value of the assets being sold was £39 million as of December, and Bakkavor expects to book a net profit on disposal of £15 million. This will be used to reduce leverage, the company said.
The business in China has been dilutive to group adjusted operating profit margin, Bakkavor said, and its disposal will support the company’s medium-term target of a 6% margin. This reached 5.0% in 2024, up from 4.3% in 2023.
Earlier this month, Bakkavor agreed in principle to a takeover offer from UK peer Greencore Group PLC. The cash and shares offer values each Bakkavor share at 200 pence and the company as a whole around £1.2 billion.
Bakkavor shares were up 0.3% to 175.60p on Tuesday morning in London.
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