IAWS/Hiestand deal should deliver the goods

THE merger of IAWS and Hiestand of Switzerland to form Aryzta, based in Switzerland, marks a significant step forward in the evolution of IAWS, which will trade for the last time today on the Irish Stock Exchange.

The merger creates a company with the potential to double its earnings over five years, provided the bottom doesn’t totally fall out of the global economy.

And even if it does, food has always been a good defensive play and in its new guise it is reasonable to assume the former IAWS will continue to deliver for investors as it has over the past 10 years.

These are two complementary businesses, to quote Owen Killian, boss of IAWS, who has spearheaded the integration.

It is the culmination of a five-year partnership that began with IAWS’s strategic shareholding in Hiestand.

Both operate in the value- added bakery and convenience food market with a focus on innovative product development.

Both deliver to an extensive network of customers in food service and retail channels and each crucially own the intellectual property that creates those products while they also have extensive direct store delivery facilities.

In other words they have the distribution outlets for their goods and they each own the technology behind the bulk of the products they sell across their extensive range of markets.

Integration of the two groups should pose few problems and the greatest challenge now is to see how much each can exploit the additional openings the merger brings to the combined operations.

When IAWS first announced the deal back in early June it said the two companies shared a corporate culture focused on people and processes.

The strong strategic fit of the businesses combined with a leading management team drawn essentially from the Irish company will create the global leader in value added baked goods.

Growth can be achieved by delivering sustainable revenue and long-term earnings growth while deriving advantage from leveraging synergy opportunities.

The wording is impressive, delivering on them will be the real challenge, but it does look as if this is a merger of two operations that in truth share very similar values.

On a combined basis the two companies will have sales of pro-forma revenue of €2.3 billion with earnings (EBITA) of €213m and net profit of €145m, based on audited figures.

Aryzta will start trading in Switzerland and Dublin this Friday and will be chaired by Denis Lucey, chairman of IAWS. Wolfgang Werlé, chairman of Hiestand, will be deputy chair.

All of the existing directors of IAWS and Hiestand will join the board of Aryzta, which will be managed by Owen Killian, currently the boss of IAWS.

Other key IAWS management, including chief operating officer Hugo Kane and chief financial officer Patrick McEniff, have also been appointed to those functions within the enlarged group.

Urs Jordi will remain as chief executive officer of Hiestand International.

Those appointments give continuity to the new group and ought to be reassuring to both sets of stakeholders, at a time when uncertainty about the future of corporate profits is a big concern.

Effectively key acquisitions, including that of Cuisine de France in Ireland and Delice de France in England, were inspired moves that allowed the group to meet a growing demand for better quality breads and savouries and which allowed stores and the catering sector to provide products that satisfy demanding consumers.

If they continue to operate to that formula, there seems little doubt that the merger will turn out to have been fully justified.

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