Takeover was always part of the game plan

THE IAWS deal with Hiestand broadens the global spread of the group significantly, giving it access to markets in Japan, Malaysia and Australia, where the Swiss group has been active.

Germany also comes into the frame adding to the Irish group’s growing European presence that includes Ireland, Britain and France.

Add to that the North American presence of the Irish group, coupled with its joint venture with the Canadian chain Tim Hortons, and the logic of the move becomes even more compelling.

It makes the group the global leader in value-added baked goods and adds to the potential of the combined operations, allowing for significant exchanges on technologies that can be used in generating new products and new means of producing better product offerings.

IAWS has had a 32% stake in Hiestand for some time, having taken its initial 22% share back five years ago, to which it added subsequently to bring its stake to 32%.

It was always presumed, knowing the strategic nous of IAWS chief executive, Owen Killian, that Hiestand was a takeover target. Why else take as big a stake as he could in the business under Swiss takeover rules without having to make a bid, unless he had a bigger game plan? For one regarded as a superb strategic thinker, it is almost a given that anything Killian will take a minority stake in, is more than likely a takeover target, if it is not taken over at once.

Commenting at the announcement on the effective takeover of the Swiss company, Killian talked about the shared ethos across the two groups that was the cement that would ensure the emergence of a successfully enlarged group.

In their intellectual property capabilities, their manufacturing and their dealings with customers, Killian spoke of the “shared corporate values” across both groups. He described these as extremely important as “they are the glue that keeps people passionately focused on their products, on their customers and on all the businesses in which they operate”.

He went on to make the point that with its combined €2.3 billion worth of sales, the group will be a global leader in a €30bn market that continues to grow strongly.

It may come as a surprise to learn that Europe is the leader in this par-baked and other convenience food offerings, being well ahead of the US in this market, accounting for 47% or €14bn of the €30bn against 30% or just €9bn for the North American market.

That’s the rationale for the merger which also means the group’s headquarters is moving to Switzerland, despite the fact that IAWS executives are totally in control of the business. This was due to technical reasons linked to the dual listing of the new group, to be called Aryzta on the Irish and Swiss exchanges.

But given the nature of modern businesses, supported as they are with new technologies, a head office was more notional than real to executives, Killian said.

It is not clear what that will mean ultimately for the top executives, but right now their major focus is on growing the business to ensure the group continues to deliver the excellent results it has been generating for several years now.

In buying another 32% of Hiestand, IAWS was effectively taking control of the business, and the merger was the next logical step.

Now the immediate concerns are delivering on earnings projections, forecast to double in five years.

That goal will be aided by the fact that the group has over €1bn in bank funding, allowing it to continue to build the business through strategic acquisitions, while extracting the benefits from synergies the combined business offer.

Given its success to date, the doubling of earnings may turn out to be conservative as the Irish group moves into a new phase of very strong growth.

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