Shareholders expected to support Arytza’s €800m cash call

Analysts believe shareholders will back troubled Irish-Swiss baker Aryzta’s bid to raise €800 million despite seeing the group’s value fall by €420 million in two weeks.

The maker of Cuisine de France bread said on Monday it intended to raise €800 million to reduce debt, which stood at €2 billion earlier this year, and give it the finance needed to implement a business plan.

Aryzta said it would raise the cash by issuing new shares, giving the right to current investors to buy the stock in proportion to their existing holdings.

Its shares fell 6 per cent to 8.242 francs in Zurich, where Aryzta has its main listing. The company’s value had fallen from €1.1 billion on July 31st, the end of its financial year, to €676 million on Monday.

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Ian Hunter, an analyst in stockbroker Investec's Dublin office, said that shareholders were likely to provide Aryzta with the €800 million in spite of its difficulties.

He suggested that the group’s investors had changed over the past year and many of those that bought shares recently expected it to seek more capital.

“They will have taken that position knowing that there was something like this coming down the tracks,” he said.

Fintan Ryan of Berenberg Bank echoed that shareholders anticipated the move. "A lot of people have already factored in that the company needed to go to the market to raise more capital," he said.

Mr Hunter argued that the only surprise was that Aryzta was seeking to raise €800 million. Most analysts calculated that the figure would be about €330 million.

More details

Aryzta will give more details on October 1st when it publishes results for the financial year ended in July.

Mr Hunter said this gave chief executive Kevin Toland and his management colleagues time to convince shareholders to back the fundraising.

Mr Toland and chief financial officer Frédéric Pflanz took over last September. Since then they have sold operations such as Cloverhill in the US and La Rousse Foods in Ireland, that were non-core to its main business.

They were expected to sell Aryzta’s 49 per cent stake in French frozen food retail chain Picard. The company said that it remained committed to this.

Existing shareholders could see their holding diluted by more than 50 per cent if they do not exercise their right to buy the new shares.

Shareholders in the troubled business have already seen the value of their investment slide over recent years amid a spate of profit warnings and a management reshuffle.

Aryzta pledged to cut debt by €1 billion over four years. The company expects assets sales, including Picard, to cover €450 million of this.

Net liabilities

Total debt was about €2 billion midway through its financial year at the end of January. Net liabilities were €1.6 billion at that point.

The baker confirmed yesterday that full-year earnings were between €296 million and €304 million, in line with expectations.

Aryzta stated that it was in compliance with the terms of its covenants with banks at the end of its financial year on July 31st. These require it to maintain net debt at four times earnings.

Mr Toland said: “A significantly improved capital structure will provide Aryzta with the means to continue to take the necessary steps to reposition the business and deliver on our strategy.”

Its restructuring programme, Project Renew, aims to save €90 million a year by 2021.