Analysis: The news that IAWS is to significantly increase its exposure to North America was welcomed yesterday by the market, with analysts saying it was something the Irish food group had been looking to do for a long time.
Currently the US, where it owns the La Brea Bakery, accounts for about 13 per cent of IAWS's profits. With Canada, North America contributes about 25 per cent of total group profits.
However, this isn't the acquisition's only attraction. As well as increasing the Irish group's exposure across the Atlantic, it also enhances its range of products.
La Brea produces a very specialised type of bread, which retails for relatively high prices and, as a result, attracts a particular category of shopper. The acquisition of Otis Spunkmeyer opens up the possibility of cross customer pollination with the introduction of a completely new type of shopper used to buying Otis's cookies and muffins.
"It takes the group into a completely new segment in another niche area and expands its customer base very substantially," said one analyst. "There should be plenty of opportunity for cross-selling of products." Currently, half of all bakery consumption is in the sweet baked category - an area where until this acquisition, IAWS had no exposure.
In addition, it also gives the Irish group a stronger foothold in the US food services business - Otis is the number-one supplier of frozen cookie dough to the US food service sector - an area which is growing strongly. In fact, half of every dollar spent on food in the US goes on food outside of the home.
Analysts said the acquisition is expected to be earnings-enhancing immediately on completion and, according to one analyst, is expected to add about 4 per cent to IAWS's earnings per share - something that is believed to have been a necessary factor for any such acquisition as far as IAWS was concerned. According to the company, the acquisition will increase US sales by 200 per cent to more than $530 million (€423 million).
The size of the deal - IAWS's biggest - is also significant. This one is worth about the same as all other acquisitions made by the group since the 1997 purchase of its flagship brand, Cuisine de France.
