Acquisition Rationale

The principal reason for acquiring Laurens Patisseries Limited ('Laurens') is to strengthen further Bakkavör Group's presence in the added-value desserts market sector. Laurens is a well managed business with strong customer relations and has a good reputation for service, quality and innovation. It complements Bakkavör Group's current business portfolio and supplies Bakkavör Group's current customers.

The premium dessert and cake market in the United Kingdom (excluding high volume dairy-based products such as fromage frais and yoghurts) grew by 6% in 2005[1] and is estimated to be worth around £400 million per annum at Retail Sales Value. Laurens' sales in 2005 grew by around 20%, over three times faster than this section of the market. This strong performance can be attributed to pro-active new product development and business wins. Currently, Laurens has around 130 products and specialises in cream-based desserts such as: choux products (e.g. cream-filled éclairs and profiteroles), slices, doughnuts, trifles, custard tarts and potted desserts which complement Bakkavör Group's existing desserts product portfolio.

About Laurens Patisseries

Laurens is a family business and has been operated by its present management since 1992. The business operates one site in Newark in the United Kingdom and employs approximately 1,200 people. Laurens supplies major UK retailers under customers' own brands with a variety of added-value chilled desserts and cakes and holds a leading position in its niche market.

Laurens has a consistently strong financial record characterised by high sales growth, profitability and strong cash flow generation. In 2005 Laurens' turnover totalled £75 million and since 1999 the compound annual growth rate of sales has been 25%.

Financing

Barclays is providing a £155 million loan to Bakkavör Group of which £43 million will be used to refinance Hitchen Foods (acquired by Bakkavör Group in October 2005) which was financed with a bridge loan from Kaupthing Bank. The terms of the loan from Barclays are at 90bp over LIBOR reflecting Bakkavör Group's strong financial position. Part of the acquisition price, £30 million, will be satisfied by the issue of shares in Bakkavör Group. The Board of Directors of Bakkavör Group will propose at a shareholders meeting scheduled on 9 May 2006 that shareholders shall not have pre-emptive subscription rights to the new shares.

Business continuity

The senior management will remain with Laurens to ensure continuity in the business. After the acquisition the Seller will acquire a significant interest in Bakkavör Group and will hold approximately 5% of Bakkavör Group shares.

Ágúst Gudmundsson, Executive Chairman of Bakkavör Group, commented:

"Laurens is a high-quality supplier of desserts with good customer relations and a strong reputation for quality, innovation and service. It has an experienced management team which has developed a profitable and well-invested business. Laurens has a leading position in its chosen segment of the market and it complements our existing desserts business. This acquisition is a good example of our intention to continue to strengthen our market position in our chosen areas within the fresh prepared foods markets. The fresh prepared foods market continues to grow ahead of the general food market and we will continue to focus on further business opportunities in this area."

Advisors

Key advisers to the Group were Deloitte, which performed a financial due diligence review and Eversheds, which performed a legal due diligence review. Both due diligence reviews are complete.

Future prospects

Laurens will be consolidated into the Group from the date of acquisition. Management of Bakkavör Group will continue to maximise synergies across the enlarged Group, benefiting from the strong market position which it now commands. Further consolidation in the UK fresh prepared foods sector is anticipated and Bakkavör Group confirms its commitment to play an active role in this trend.

Shareholders meeting

A shareholders meeting will be held in Arsal, Hotel Saga on 9 May 16:00 where the Board of Directors of Bakkavör Group will submit a proposal to increase the Group's share capital by up to ISK 85 million in nominal value. A presentation of the Group's Q1 results and the acquisition of Laurens will also take place at the meeting as previously announced.

A webcast of the meeting can be viewed in real time at www.bakkavor.com and www.icex.is at 16:00 GMT. Questions can be submitted at the meeting or in advance by sending an email to [email protected].

Information will be available after the meeting on the Group's website, www.bakkavor.com, the website of the Iceland Stock Exchange, www.icex.com and on www.huginonline.com.

For further information, please contact:

Ágúst Gudmundsson Executive Chairman Bakkavör Group Tel: +44 (0)20 8728 5100

Lýdur Gudmundsson Chief Executive Officer Bakkavör Group Tel: +44 (0)20 8728 5100

Hildur Árnadóttir Chief Finance Officer Bakkavör Group Tel: +354 550 9700

About Bakkavör Group

Bakkavör Group is a leading international food manufacturing company specialising in fresh prepared foods and produce. The Group operates over 40 factories and employs over 14,000 people in seven countries with a pro-forma turnover in 2005 of over £1 billion. The Group's Head Office is in Reykjavík, Iceland, and the business is listed on the Iceland Stock Exchange (www.icex.is Ticker: BAKK).

Bakkavör Group was founded in 1986 and celebrates its 20th Anniversary this year. During this time, the business has grown significantly and today Bakkavör Group is the largest provider of fresh prepared foods and produce in the UK.

The Group's vision is to be recognised and respected as the world's leading fresh prepared foods and produce provider. Bakkavör Group has attained leading market positions in its key market areas of ready meals, pizzas, convenience salads and leafy salads. In total, the Group makes over 4,500 products in 17 product categories, which are developed and sold predominantly under its customers' own brands. In addition to the UK and Iceland, the Group also has business operations in France, Belgium, South Africa and China and is well-positioned for further expansion.

Disclaimer

This press release has been prepared for the professional investor. Bakkavör Group hf. (Bakkavör) has not taken into account any shareholder investment objectives, financial resources or other relevant circumstances. All securities transactions involve risks, which include (among others) the risk of adverse or unanticipated market, financial or political developments and, in international transactions, currency risk. Due care and attention has been used in the preparation of this forecast information. However, actual results may vary from their forecasts, and any variation may be materially positive or negative. Forecasts, by their very nature, are subject to uncertainty and contingencies, many of which are outside the control of Bakkavör.

Bakkavör cannot guarantee that the information contained herein is without fault or entirely accurate. The information in this material is based on sources that Bakkavör believes to be reliable. Bakkavör cannot however guarantee that all information is correct. Furthermore, information and opinions may change without notice. Bakkavör is under no obligation to make amendments or changes to this publication if errors are found or opinions or information change. Bakkavör accepts no responsibility for the accuracy of its sources.

Bakkavör is the owner of all works of authorship including, but not limited to, all design, text, sound recordings, images and trademarks in this material unless otherwise explicitly stated. The use of Bakkavör's material, work or trademarks is forbidden without written consent except were otherwise expressly stated. Furthermore, it is prohibited to publish material made or gathered by Bakkavör without written consent. [1] TNS, 52 weeks March ending 2006

The Icelandic version of the press release including tables can be downloaded from the following link: