Will Covid-19 be the final straw for Aryzta’s troubled US business?

Irish-Swiss group announces review amid further decline in shareholder value

Has Aryzta inched closer to selling its troubled US arm? That's now the single biggest question hanging over the business. The Swiss-Irish baked goods specialists waited for the close of markets yesterday to announce it had brought in financial advisers Rothschild & Co to undertake a strategic review of the group amid another precipitous fall in its shares.

The company’s stock closed at just 33 cent in Dublin yesterday, marking a near 98 per cent slide in value for investors over the past five years.

The crash is linked to Aryzta's highly indebted and complex capital structure and its ailing US business. The company behind Cuisine de France bread and doughnut maker Otis Spunkmeyer has endured setback after setback in the US. And the question now is whether the Covid-19 crisis will be the straw that finally breaks the camel's back.

About 70 per cent of its US business is tied into quick-service restaurant chains, such as McDonald's and Subway, and various other food service channels, which have shuttered for weeks to halt the spread of the virus. The damage is not of the company's making, but it couldn't have come at a worse time.

Underperforming

The group’s US operation was already underperforming in terms of volume growth and profitability despite a major restructuring plan designed to streamline the business and drop non-core activities.

The exit of its North American boss Dave Johnson earlier this year was perhaps another sign that things weren't rosy in the garden stateside.

Two of the company's largest investors, Cobas Asset Management and Veraison, have teamed up to call on management for changes to address the decline in shareholder value.

Between them they control more than 17 per cent of the stock. Cobas opposed the terms of the company’s near €800 million capital raise in 2018, and at the time recommended pulling out of the US as a way of further streamlining the business.

The US market has proved a wrecking ball for several high-profile Irish companies. Sandwich-maker Greencore and drinks group C&C were both forced to beat a retreat. Will Aryzta be the next to crack?