Aryzta’s row with main shareholder over €800m capital raise escalates

Aryzta's main shareholder, Cobas Asset Management, has accused the baked goods maker of "drawing an unduly grim picture" of its current financial situation to push through a planned €800 million share sale.

Cobas, which owns about 14.5 per cent of Aryzta, demanded earlier this month that the Swiss-Irish company behind Cuisine de France go cap in hand to shareholders for half the amount it plans to raise, saying that a sale of non-core assets could generate an additional €250 million to shore up its financial base.

Aryzta said last week that Cobas’s proposal “is inadequate and presents significant execution risk for shareholders”, saying it had reviewed its options “against the backdrop of a challenging financial position and the need to maintain customer and supplier confidence in the business”.

However, Cobas said on Tuesday: “We believe that the company now is drawing an unduly grim picture of the current situation with the sole intent to convince shareholders to support the excessively large and dilutive capital increase.”

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The investment firm said that Aryzta’s comments on its financial position last week contrast with more “reassuring statements” from the company at the start of October.

Shareholders are due to vote on the capital raise plan at Aryzta's annual general meeting in Switzerland next week.

Aryzta said on Tuesday evening that Cobas’s proposal “carries significant timing and execution risk” and there was no certainty that it could be implemented.

Sufficient funds

Cobas said that Aryzta would have sufficient funds in raising €400 million and using its €517 million cash balance as of the end of July for working capital needs as the company seeks further alternatives.

However, Aryzta said that the cash figure Cobas has focused on is “inaccurate as it is selectively chosen” and overstates the group’s cash position by more than €170 million, by not taking into account the company’s overdrafts.

“The board believes the Cobas proposal for a €400 million rights issue is inadequate, adds significant commercial and financial uncertainty and will not adequately address the company’s needs,” Aryzta said.

“The board also believes the capital raise needs to be a one-time transaction to repair the balance sheet. Trying to fill the gap with unidentified disposals, raising of further debt and/or a staged capital raise, as suggested by Cobas, would add further management distraction and increase uncertainty, with no guarantee of garnering shareholder support nor or in the future,” it added.

Last Friday, investor advisory firm Institutional Shareholder Services revealed that it had reversed its initial advice to Aryzta shareholders to vote down the planned €800 million capital raise, while two other proxy advisers have come out in favour of the plan.

The fundraising will dilute Aryzta’s earnings per share by about 25 per cent, according to Zuercher Kantonalbank analyst Patrik Schwendimann.

However, it will boost the company’s balance sheet ahead of the planned sale of its 49 per cent stake in French frozen food group Picard, which it bought for €446.6 million in 2015 in a deal that was badly received at the time by investors.