ARYZTA to Dispose of Businesses in North America and Latin America
Having rejected a €734 million takeover offer from Elliott Management, a US hedge fund, the board of ARYZTA, the global speciality bakery group based in Switzerland, has decided to focus on the European and APAC markets and to dispose of the businesses in both North America and Latin America. The proceeds will be used to significantly reduce debt levels over the next six to nine months.
The board also plans to improve the operational performance of the remaining Europe and APAC businesses, and the preparations for implementation are well-advanced. By the end of 2021, it expects to secure at least a 25% reduction in central overhead costs as the group moves to a multi-local, lean, and more agile business model. The process to remove central costs has already started as ARYZTA simplifies operations and makes local and country management responsible for all their costs and profit delivery targets. This change is expected to result in improvements in customer engagement experience through faster decision-making, shorter new product innovation lead times, improved customer service, and enhanced quality control responses.
ARYZTA’s 2019 EBITDA margin of 9% was the lowest among its European peer group – with the best performance some 60% higher at 16.5%. ARYZTA has scale and capability advantages that support its minimum target to improve the EBITDA margin run rate to the peer median level (c.12.5%) by simplifying its business and moving to a multi-local model. The board expects that this will be achieved within the next two years.
ARYZTA operates in growing markets and many of its European competitors are mid-sized privately owned businesses with succession issues. Once ARYZTA has improved its performance and reduced its debt levels, the bakery group will have the potential to actively participate in this likely market consolidation process. The board also envisages a return to sustainable organic growth over the next two to three years as the locally empowered business model improves its innovation power and new contract win rate.
