“Boparan’s bid for Northern Foods underestimates the fundamental value of the company, and the board may be missing an opportunity for a deal with Greencore that is in the better long-term interests of shareholders. Whilst we understand that the certainty of Boparan’s all-cash offer is attractive, the benefits of a merger with Greencore would have been substantial; the £40m of cost savings the management of Greencore think they can extract from a merged company is a very conservative figure, with our analysis suggesting it could be closer to double that amount. We believe a fair value for Northern Food’s shares given the potential savings of the merger is closer to 90p.

“Whilst many analysts have pointed out the significant premium to the Northern Foods share price, these same analysts had sell recommendations on the stock and did not expect a counter-bid, so it is hardly surprising that they consider this offer fair value. They are also ignoring the ongoing restructuring of the troubled frozen foods business at Northern. If this business returned to the margin it enjoyed prior to March last year, then Boparan’s offer values the company at less than 10 times earnings. Boparan’s offer is for 73p, or 70p once you account for the 3p dividend that was due to be paid.”

Martin Brown runs the Ignis UK Equity Income Fund, which owns shares in Northern Foods.