Aryzta shares soar on management clear-out

Shares in Cuisine de France owner Aryzta jumped by almost 12% yesterday on the back of the troubled group launching a recovery bid which will see founder and chief executive Owen Killian leave the company and its investment strategy reviewed.

Mr Killian, as well as chief financial officer Patrick McEniff and John Yamin, head of Aryzta’s Americas business, have tendered their resignations and will step down at the end of the company’s financial year in July.

Three new chief operating officers, for Europe, the Americas, and the Asia-Pacific/Middle-East and Africa regions — Dermot Murphy, Ronan Minahan, and Robert O’Boyle respectively — have been appointed, while a recruitment process for the main jobs is set to get under way.

Aryzta has also reached agreement with lenders to increase its covenants to four times net debt/Ebitda from 3.5 times and has begun looking at “investment alternatives” for its controversial stake in French high-end food retailer Picard, which suggests a sale.

Aryzta bought 49% of the highly indebted Picard for nearly €447m in 2015 and has waived on an option to buy the remaining 51% from London-based private equity house Lion Capital.

One analyst estimated that Aryzta’s Picard share is worth €320m-€340m, but feared any buyer — be it Lion Capital or other — would seek a much larger discount.

Any monetisation of the Picard stake will go to strengthening Aryzta’s balance sheet, the company said yesterday.

The moves are being seen as a direct result of feedback garnered by new chairman Gary McGann when recently talking with investors over strategy.

The Irish-Swiss bread and baked foods company has lost nearly two-thirds of its share value in the past two years. Investor confidence in its management team has eroded over falling earnings and unpopular investment choices.

Last month, Aryzta, due to publish first-half results next month, said earnings for the six months to the end of January will be around 20% down on a year-on-year basis. That profit warning saw Aryzta’s share price plummet by more than 32% in one day, wiping €1.2bn off the company’s market value.

Yesterday’s news boosted the company’s share price, but analysts remain wary.

Darren McKinley at Merrion Stockbrokers said Aryzta shares should trade between €28 and €33 (they were around €31 yesterday) for the next few weeks, but added that “we would be reluctant to hold the stock into results”.

Investec’s Ian Hunter said the widening of the lending covenant — which may increase Aryzta’s funding costs — could suggest Aryzta is not confident of meeting full-year earnings targets.

He said a management vacuum — when the underlying business is struggling and needs restructuring, and when the company is negotiating certain investment exit strategies — will not do much to calm investors.

“The resignation of senior management leaves, in our opinion, an undesirable vacuum in Aryzta at a time when the company is facing significant headwinds in its ongoing business, requires debt refinancing and is selling its joint-venture stake,” said Mr Hunter.

“While monetisation of the Picard stake would ease debt concerns, we believe it will come at a considerable loss in value.”


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