Aryzta’s sale of Cloverhill ‘likely to be less than €100m’

Swiss-Irish baked food company Aryzta is likely to receive considerably less than the touted €100 million price tag for the sale of its troubled Cloverhill facilities in Chicago, Investec has said.

The firm, which includes the brands Otis Spunkmeyer and Cuisine De France under its umbrella, said in a statement on Thursday that an agreement had been reached to sell the operation to Hostess Brands. The sale includes the brands Big Texas and Cloverhill.

Ian Hunter, Investec's analyst for the food sector, said the cost of the deal was likely to have been considerably less than €100 million. "People have been thinking about €100 million but it is probably quite a bit less than that," he told The Irish Times.

“I think they’ll probably have had to compromise on price given it’s a loss-making facility. However, it’s comforting that the company has moved quickly on the sale of this asset.”

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Consistent

Aryzta has separately agreed to sell the legacy Cicero facility to Bimbo Bakeries in the United States.

The company said the disposals were consistent with its commitment to “address non-core or nonstrategic businesses and reflect a focus on maximising free cash flow”.

The company paid around $390 million for the Cloverhill business back in March 2014.

Progress at Cloverhill had been proving difficult for the company. Aryzta’s organic revenue in North America dropped by 7 per cent in the three months to October 31st, 2017, “driven entirely” by Cloverhill.

The business was particualrly badly hit by the loss of a third of its workforce – around 800 staff – after a raid by federal authorities discovered that the immigrant workers did not have the necessary paperwork. The workers had been supplied by an outside employment agency.

Their departure, in what was one of the biggest raids on a European business as part of a clampdown on illegal immigrants following the election of president Donald Trump, disrupted production and led to customers taking legal action against Aryzta.

“It is good for the company to get this off its books,” said Mr Hunter. “It signalled it was going to sell it. We all knew it was one of their troubled plants, as well as being non-core. It clears one obstacle out of the way.

“It probably doesn’t move the balance sheet problem significantly, but we still have possibly the sale of its 49 per cent stake in Picard before the year end.”

Earlier this year, Aryzta disclosed it took a €860 million impairment charge against its assets, which again mainly concerned Cloverhill.

Aryzta was downgraded to a “sell” recommendation by Investec and a “hold” recommendation by Goodbody following a substantial profit warning last week.