Aryzta finally cuts its losses at Picard

Shareholders happy despite price being below what market expected

Long-suffering shareholders in Aryzta, the Swiss-Irish baked group, would seem to identify with your average UK Tory voter.

Just as a majority of Conservatives polled by YouGov during the summer said they’d happily see the UK economy take a hit to get Brexit done, Aryzta investors cheered news on Friday that the company has finally agreed to sell most of its stake in a French company frozen foods group Picard – even though the price is well below what the market expected.

Aryzta's shares have fallen by 95 per cent since the company bought a 49 per cent stake in Picard in early 2015. The €447 million deal was badly received by investors at the time, marking a turning point for then boss Owen Killian, whose roll-up acquisitions drive had never been questioned before.

It would presage a period of profit warnings and disappointing results as other parts of the business unravelled, leading to a management overhaul, €800 million share sale to reduce net debt, and a round of asset sales.



More than two-and-a-half years on the block, Picard's sale was seen as pivotal for Ayrzta's turnaround under current CEO Kevin Toland. But it had been dragging on, not helped by a tricky majority shareholder in private equity firm Lion Capital.

Aryzta said on Friday that it will sell 43 per cent of Picard for €156 million to a French firm, Invest Group Zouari. Adding in special dividends scraped out in recent years as Picard refinanced itself, the total amount recovered amounts to €247 million. Aryzta’s remaining 4.5 per cent holding is worth €16.3 million.

The market had been expecting a sale price of more than €200 million. But the company’s shares soared as much as 16 per cent in Zurich.

“The disposal is certainly a relief, given Aryzta’s cash situation, but the discount price is not,” said Vontobel analyst Jean-Philippe Bertschy. “The value destruction within four years with Picard has been huge.” More than 40 per cent of the original investment, in fact.

The original investment in Picard was funded mainly from €400 million raised by Aryzta from the sale of a bunch of shares in its former subsidiary, Origin Enterprises.

Retaining the shares in the Dublin-listed agri-services group wouldn’t have led to a much better outcome. They’ve since fallen by about a third.