Pat O’Driscoll, the chief executive of Northern Foods, is to get a £470,000 payoff after being ousted yesterday in a move that lifted the food manufacturer’s shares.

Northern Foods, which makes Goodfella’s pizzas and Fox’s biscuits, said that Ms O’Driscoll had agreed to step down immediately as chief executive after three years in the job “to pursue opportunities outside the company”. She will be replaced by Stefan Barden, at present the head of the company’s chilled and bakery divisions.

Ms O’Driscoll’s departure follows three profit warnings from Northern Foods in three years, which the company has variably blamed on rising raw material prices, weakness at its core customer Marks & Spencer and the bird flu scares.

Shares gained 5 per cent to 129¼p in early trading yesterday, before settling to close at 125¾p, up 1½p. Under Ms O’Driscoll’s leadership, Northern Foods has undergone a restructuring programme that has resulted in the sale of 40 per cent of the company.

“Since arriving at Northern Foods three years ago, I have completed an extensive restructuring,” Ms O’Driscoll said yesterday. “Today Northern Foods is a simpler, more resilient and more competitive business, and I believe it is the right time for me to move on.”

Northern Foods said that it would pay Ms O’Driscoll a basic salary of £470,000 over the next year, but noted that the payments would stop if she found another job before the year was up. A spokeswoman for the company said that her departure was a “mutual” decision that came after a “tough” three years.

Mr Barden, who is credited with turning around Northern Foods’ chilled food operations, will work with Ms O’Driscoll over the next three months to ensure a smooth transition.

Ms O’Driscoll, who established a reputation as a fierce cost-cutter at Shell, where she overhauled its European forecourts business, joined Northern Foods in March 2004, when the company was reeling from a string of profit warnings. In an effort to remain competitive in the face of the dominant buying power of the supermarkets, as well as rising raw material costs, she cut 1,000 jobs, replaced the finance director, and closed plants. She also presided over the £211 million sales of Northern’s pastry and cakes business, which helped to streamline the group. Despite this, the company continued to perform poorly, resulting in further profit warnings, with trading appearing to stabilise only recently.

Jeff Stent, an analyst at Citigroup, said that the timing of the departure was curious, given the recent strength in the share price, which has rallied 45 per cent since mid-Novem-ber. Mr Stent emphasised that the broker’s concern with the company had never been the quality of the management but, rather, over the resilience of its portfolio.

He suggested that Ms O’Driscoll’s departure could relate to a difference in opinion on whether Northern Foods should consider the acquisition of Burton’s Biscuits.

Mr Barden, who was appointed to head up Northern Foods’ chilled foods business in January last year, hinted at his strategy by saying that he would focus first on consumers, as well as on product innovation and “operational and financial discipline”.

He said: “I am pleased to be leading Northern Foods in the next phase of its growth.” Analysts said that the appointment seemed promising, noting that Mr Barden “appears to have stabilised . . . a worryingly deteriorating business” in the chilled foods division.

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