Natixis's Dual Play in the £1.2B Bakkavor Takeover

LONDON, UK – December 03, 2025

A seemingly routine regulatory filing has peeled back the curtain on the complex financial machinery operating behind one of the UK’s largest food industry deals of the year. On Tuesday, French financial services giant NATIXIS SA disclosed a sophisticated and seemingly contradictory position in Bakkavor Group plc, the fresh-food manufacturer currently the target of a £1.2 billion takeover by rival Greencore Group plc. The filing, a mandatory Form 8.3 under the UK’s Takeover Code, reveals more than just compliance; it offers a masterclass in the high-stakes world of merger arbitrage and the strategies institutional investors deploy to extract value from corporate consolidation.

While the headlines focus on the creation of a new £4 billion convenience food behemoth, the NATIXIS disclosure shows where the real financial action is. The bank reported holding a 0.53% interest in Bakkavor through direct share ownership while simultaneously holding an identical 0.53% short position through cash-settled derivatives. This dual long-short stance is no accident; it is the hallmark of a calculated strategy designed to profit from the intricate dynamics of the takeover process itself.

Decoding the Arbitrage Playbook

At first glance, betting on a stock to go up (a long position) while also betting on it to go down (a short position) seems illogical. However, in the context of a major M&A deal, it is a sign of a highly specialized strategy known as merger arbitrage. Arbitrageurs aim to profit from the "spread"—the difference between a target company's stock price after a deal is announced and the final price the acquirer will pay upon completion.

NATIXIS’s filing provides a perfect case study. On December 2, the bank purchased 303,954 of Bakkavor’s ordinary shares at 231.00 pence each. In a parallel transaction, it increased a short position for the exact same number of shares using a Total Return Swap (TRS), a type of derivative. This allows NATIXIS to gain economic exposure to a price decrease without actually borrowing and selling the stock.

The motivation for such a move is multifaceted. Primarily, it is a hedging mechanism. The Greencore-Bakkavor deal, while recommended by Bakkavor's board and progressing through regulatory hurdles, is not yet complete. The UK’s Competition & Markets Authority (CMA) only recently accepted Greencore's proposal to divest its Bristol chilled soups and sauces site to alleviate competition concerns. Should the deal unexpectedly collapse or its terms change, Bakkavor's share price—which has soared from 151 pence before the offer to over 230 pence—would likely plummet. The short position acts as an insurance policy, offsetting potential losses on the long position.

Furthermore, in a cash-and-stock deal like this one, where Bakkavor shareholders are set to receive both cash and new Greencore shares, the strategy can become even more intricate. Arbitrageurs may pair a long position in the target (Bakkavor) with a short position in the acquirer (Greencore) to hedge against fluctuations in the acquirer's stock price. While NATIXIS's disclosure details a short on Bakkavor itself, it points to a broader strategy of managing the complex risk-reward profile inherent in the final stages of a major acquisition. By precisely matching its long and short dealings, the bank is likely isolating and capitalizing on a specific variable, whether it’s the financing of the deal, dividend payments, or minute price discrepancies between the stock and its derivatives.

A New Food Giant Faces Regulatory Scrutiny

The financial engineering by players like NATIXIS is unfolding against the backdrop of a transformative deal for the UK food landscape. The proposed merger between Greencore, a leader in pre-packed sandwiches, and Bakkavor, a powerhouse in fresh prepared meals and salads for retailers like Tesco and Marks & Spencer, is set to create a dominant force in the convenience food sector.

The strategic rationale is compelling. The combined entity would boast annual revenues of approximately £4 billion, operate across dozens of manufacturing sites, and employ over 30,000 people. Greencore has touted expected pre-tax cost synergies of at least £80 million annually by the third year, driven by economies of scale, supply chain optimization, and a consolidated operational footprint. For investors, the promise is a more diversified, resilient business with a commanding market presence and enhanced capital markets profile.

However, this level of consolidation inevitably attracts regulatory attention. The CMA’s Phase 1 inquiry, launched in September, highlighted potential competition issues. The probe focused on the risk that a combined Greencore-Bakkavor could dominate the supply of own-label chilled sauces and dips to UK grocers, potentially leading to higher prices and less choice for consumers. Greencore’s proactive offer to sell its Bristol manufacturing facility was a crucial move to appease the regulator and keep the deal on track for its targeted early 2026 completion. This regulatory hurdle, now seemingly cleared, represented a key risk point in the merger timeline—precisely the kind of uncertainty that arbitrageurs' strategies are designed to navigate.

The Bottom Line: Reading the Market Signals

The market has been pricing in a high probability of the deal’s success. Bakkavor’s shares have consistently traded well above the 151 pence level seen before the bid was announced in March. The stock’s recent price of around 231 pence, significantly higher than the initial 200 pence-per-share valuation of the offer, reflects the market's positive outlook, the value of the Greencore share component, and perhaps speculation around other factors like Bakkavor's strong recent performance.

This is where the actions of sophisticated investors like NATIXIS become so telling. Their involvement is not a vote of confidence or doubt in the long-term industrial logic of the merger. Instead, it is a pure, dispassionate financial calculation. They operate in the margins, leveraging capital and complex instruments to profit from the mechanics of the deal itself. The Form 8.3 disclosure, mandated to ensure market transparency, serves its purpose perfectly by revealing these undercurrents.

For business leaders and investors, these filings are more than just regulatory paperwork. They are critical market signals. They confirm that the stakes are high and that the smartest money in the room is actively placing bets on the outcome. As Greencore and Bakkavor move closer to creating a new UK food champion, the quiet, methodical dealings of firms like NATIXIS provide a powerful reminder that in any major corporate transformation, there is always another, more intricate game being played just beneath the surface.