Aryzta's €349m deal for Maidstone Bakeries

IN ITS third major North American acquisition since June, Irish-led food group Aryzta is to buy out its partner in Canadian company Maidstone Bakeries for €349 million.

Under the deal, Aryzta will acquire Tim Hortons’s 50 per cent shareholding in the business. The Zurich-based company has been in partnership with Tim Hortons – one of Canada’s largest convenience food chains – since 2002, investing heavily in the Maidstone Bakeries plant in Ontario. The 400,000sq ft bakery plant only provides products to the Tim Hortons brand, under a contract that extends until 2016 and which the Canadian chain can extend to 2017.

Aryzta said yesterday that the plant is operating at 55 per cent capacity, and that the buyout will allow it to extend the customer base to other operators in the quick service food industry, including First Start Bakeries, the California-based company it acquired in June.

Separately Aryzta announced that Fresh Start Bakeries is to expand into Asia, opening bakeries in Taiwan, Singapore and Malaysia. In addition it will begin the construction of a new bakery in Brazil, where it already has a presence. Aryzta plans to invest in the region of $48 million (€36 million) in the expansion.

Aryzta’s buyout of Maidstone Bakeries comes less than 10 weeks after the company bought Fresh Start Bakeries for $900 million and the pizza supplier Great Kitchens for $180 million.

The company partly funded the earlier takeovers through a $120 million share placing.

The company said yesterday that it intends to finance the takeover of Maidstone Bakeries and Fresh Start Bakeries’ expansion through the issuance of a perpetual interest bond in the coming weeks. The company said that both investments are expected to be “earnings enhancing” within 12 months.

Aryzta, which counts Cuisine de France and La Brea bakery among its brands, was formed following the IAWS takeover of Swiss baker Hiestand.

It has been steadily expanding into the US market in recent years.

The most recent results for the company show that profits for the six months to the end of January, 2010 rose 1.1 per cent to €73.8 million, even as sales declined 7.4 per cent.

On the Iseq, where Aryzta has its secondary listing, the company’s share price climbed more than 5 per cent yesterday, on the back of the acquisition news.

Goodbody’s Killian Murphy said the announcement was an extremely positive move for the company and evidence that it was fulfilling its stated strategy. The stockbroking firm is adding 4 per cent to its earning per share forecast.

Aryzta chief executive Owen Killian said the investments significantly enhanced the company’s bakery capability in North America and in the emerging growth regions of Latin America and Asia. He said the company remained on track to achieve underlying EPS growth in the 2010 financial year.