By Geoff Percival
Aryzta shares have fallen more than 4.4% as a row over the size of the Cuisine de France-owner’s planned capital raise next month deepened.
Aryzta also makes burger buns for McDonald’s. It plans to raise €800m via a rights issue in order to pay down some of its €1.5bn debt mountain.
Shareholders are due to vote on the plan early next month and it has already got the support of investor rights groups including ISS.
However, the Irish-Swiss baked foods group’s largest shareholder, Spain’s Cobas Asset Management which owns 14.5% of the business, has said the raise is too much and that €400m is a more appropriate target. Aryzta has said it has considered all potential alternatives and called Cobas’s proposal “inadequate” and one which presents “significant execution risk for Aryzta and all of its stakeholders”.
Aryzta said the full €800m is required to reduce debt and strengthen its balance sheet. It said Cobas’s proposed lower capital raise “will not address the significant liquidity and financing needs of the business”.
The row between Aryzta and its largest shareholder has now deepened, with the investor accusing the baking company of painting “an unduly grim picture” of its financial situation to ram through the disputed capital hike.
As well as a halving of the targeted rights issue proceeds, Cobas wants Aryzta to sell non-core assets, saying this could raise a further €250m.
Cobas expressed disappointment at Aryzta’s defence of its plan, saying chief executive Kevin Toland has not engaged shareholders. The baking company is reeling from a failed expansion strategy that has led to hundreds of millions of euro in losses. Aryzta’s share value has plunged over 70% in the past year.
“We believe 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,” Cobas said.
Yesterday, Aryzta reiterated its recommendation to shareholders to vote for the €800m capital raise plan.
Last month, Aryzta agreed an underwriting deal with Bank of America Merrill Lynch, UBS, Credit Suisse, JP Morgan and HSBC setting the stage for the rights issue.
Aryzta has been undergoing an asset disposal round, but recently said dividends from its much-criticised 49% stakeholding in French food retailer Picard have strengthened its balance sheet. Analysts had expected a sale of the Picard stake by the end of Aryzta’s financial year in July.
Additional reporting Reuters