IAWS secures €795m 'revolving loan'

IRISH FOOD group IAWS refinanced its debt last month by securing a €795 million “revolving loan facility” in advance of its purchase of Swiss group Hiestand.

The loan, which was agreed on June 20th, has been secured by Aryzta, a Swiss-domiciled vehicle being used by IAWS to acquire both companies. It will be used to repay IAWS’s €600 million loan facilities and to pay off Hiestand’s 245 million (€152 million) Swiss francs credit line. It will also be used to pay costs and expenses incurred in relation to the merger.

The loan has been made available by a syndicate of banks comprising Bank of America Securities Ltd, Bank of Ireland and Ulster Bank. The facility is due to expire in June 2013.

Given the global credit crunch, the loan is seen as an indication of confidence within the banking sector for the prospects of the merged businesses.

Details of the loan appear in a circular to shareholders distributed this week by IAWS, although no interest rate for the new credit facility is listed.

On a combined basis, IAWS and Hiestand will have revenues of €2.3 billion, earnings before interest, tax and amortisation of €213 million and net income of €145 million.

“The management team of Aryzta will target a doubling of the earnings base . . . within five years,” the document states.

Investors in IAWS will be asked to approve the deal at an extraordinary general meeting on July 24th. The company needs a 75 per cent approval to proceed with the deal.

Hiestand plans to hold an egm on August 19th, and requires the approval of two-thirds of its shareholders. This should be a formality, as IAWS already owns 63 per cent of the Swiss company.

The deal also needs the approval of the High Court in Ireland.

If these approvals are achieved, Aryzta’s shares will begin trading in Dublin and Switzerland on August 22nd.

IAWS’s listing in London will be extinguished. As Aryzta will be domiciled in Switzerland, its stock in Ireland will be held as depositary shares so as they can be settled within the Crest system used by the stock market here.

As a result, Irish investors trading IAWS stock will not be charged the 1 per cent stamp duty levied by the Government on share dealings here. Instead, they will pay a Swiss “securities transfer tax” of 0.15 per cent.

Dividends paid to shareholders based in Ireland will be subject to Switzerland’s 35 per cent withholding tax, as opposed to the 20 per cent rate charged here.

The circular outlines the shares options of the various IAWS executives that will vest when the transaction is completed. These will be converted into Aryzta shares, and the group management has agreed not to sell them and to fold them into a long-term incentive plan for executives in the newly merged company.