Aryzta AG: acquisitions double manufactured volumes

Zurich / CH. (aag) In what is a key milestone for the Group, Aryzta AG announces two acquisitions that substantially enhance its strategic market position. Fresh Start Bakeries (incorporating Pennant Food and Sweet Life) is a global supplier of speciality bakery products with a leading position in the Quick Service Restaurant (QSR) segment. It operates 29 specialist production facilities across the United States, Canada, Germany, Poland, Sweden, Spain, Brazil, Australia and New Zealand and has three joint ventures located in North America, Chile and Guatemala. Pennant Foods is a leading provider of speciality bakery products and solutions to the North American QSR, foodservice and retail in-store-bakery channels. Sweet Life is a leading innovator and manufacturer of sweet baked goods servicing the North American and Asian QSR channel. Separately, Great Kitchens Inc. is a leading supplier of pizza and appetisers with a focus on the deli segment of the North American retail grocery channel. The combined revenue of these businesses is 1,03 billion USD, with associated Ebitda of 133 million USD. Combined consideration for these transactions is 1,08 billion USD.

The acquisitions double Aryzta´s manufactured volumes and provide greater access to a broader customer base within the expanding QSR and retail segments. Moreover, they result in the Group maintaining a more balanced exposure to the core markets of North America and Europe, while extending its geographical footprint in the rapidly expanding Rest of World segment. Meanwhile, greater diversification in terms of customer mix enhances the defensive characteristics of the Group´s business model.

The acquisitions have been financed through existing resources (940 million USD) of bank facilities, cash raised from the debt capital markets, cash on hand and Aryzta shares (140 million USD). Following these transactions it is anticipated that Net Debt : Ebitda will be in the region of c. 3x for the year ended 31 July 2010 (excluding currency headwind the Net Debt : Ebitda ratio is anticipated to be in the region of c. 2.8x). The average Ebitda multiple associated with the transactions is 8.1x.

The incremental cost of financing and tax on acquisitions are c. 3,4 percent and c. 16,0 percent to 18,0 percent respectively. Annual maintenance capex on acquisitions is expected to be c. 25 million USD which should equate to the annual depreciation charge. Transaction costs are c. 1,5 percent of the consideration, which under new accounting rules (IFRS 3 Revised), will be expensed to the Income Statement and presented as once-off expenses for the year ended 31 July 2010.

The transactions are expected to be accretive to earnings in excess of c. 45 US-Cents per share over twelve months (delivering c. 20,0 percent uplift in EPS).

The purchase of Great Kitchens (for 180 million USD financed by debt) was signed and closed 07 June 2010. The purchase of Fresh Start Bakeries (for 900 million USD, with 760 million USD financed by debt and 140 million USD financed by equity in Aryzta) was signed 07 June 2010, is subject to anti-trust approvals and is expected to close within 30 days.

Info: Third Quarter Trading Update for the period ended 30 April 2010 – and Announcement of Strategic Acquisitions (PDF; seven pages; 141 KB).