Aryzta shares jump 15% on bid interest

Shares in Aryzta jumped more than 15 per cent on Monday as the Swiss-Irish baked goods group, which has been under pressure in recent months from a group of activist investors, revealed that it has been approached by "number" of potential bidders for the business.

The company said that chairman Gary McGann, who the dissident shareholder group has been seeking to replace at an extraordinary shareholder meeting (egm), will resign if a deal has not been struck by the time of the investor gathering. That is scheduled to take place at the later than originally expected date of September 16th.

Two other directors targeted by the shareholder group, which owns more than 20 per cent of the business and is led by Zurich-based Veraison Capital, indicated on Monday that they will resign at the conclusion of the egm regardless of the outcome. They are Dan Flinter, who is separately the chairman of the board of The Irish Times, and Rolf Watter.

Aryzta announced on May 13th that it had hired investment bank Rothschild to carry out a “strategic review” of the business, on the same day that Veraison and the bakery group’s largest shareholder, Cobas Asset Management, declared that they had joined forced to press the group to find ways to enhance value for investors.

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The activists accused Aryzta of “delaying tactics” almost six weeks ago when it said that the egm they had requested would take place in the middle of August – weeks after Rothschild was scheduled to have concluded its work. They told reporters earlier this month that Aryzta needed to sell off a further €600 million of assets to reduce debt and “return the business to profitable growth”.

While the investors declined to say whether this might involve the sale of its US business, they voiced concern that reported previous offers for Aryzta’s North American assets had not been taken seriously by its board.

Analysts at German stockbroking firm Baader Helvea said on Monday that the latest developments indicate the board has basically rejected the shareholder group’s proposals and “seems to seek an alternative strategic ‘exit’”.

Beauty contest

“Aryzta is now entering a period of beauty contest between the board and the activist shareholders, which normally should lead to an uplift in the share price,” the analysts said. “We think the mid-term fair value of Aryzta is higher than the current market /[capitalisation/].”

Aryzta currently has a market value of just over €500 million, with the stock having fallen more than 80 per cent in value since the company raised about €800 million in an emergency share sale in late 2018.

The group, which owns the Cuisine de France and Otis Spunkmeyer labels, has been struggling to halt a decline in earnings, particularly in the US, and negative investor sentiment towards its complex capital structure.

Chief executive Kevin Toland had been making headway since taking over what was a deeply troubled business in late 2017, overseeing almost €400 million of asset sales, reducing net debt, and pursuing a cost-cutting programme designed to deliver €200 million of savings in the three years to July 2021.

Shares in the company closed 15.4 per cent higher on Monday at 50.6 cent in Dublin.