The reported frontrunner to buy Canada Bread is now officially the Canadian bakery firm’s buyer of choice.
Mexico’s Grupo Bimbo on Wednesday announced a cash deal to buy all shares of Canada Bread Co. for $72 per share, or about $1.83 billion, accruing mainly to Canada Bread’s 90 per cent owner, meat processor Maple Leaf Foods.
Toronto-based Maple Leaf confirmed Wednesday it has agreed to vote all of its shares of Canada Bread in favour of Bimbo’s bid at a meeting of the Toronto bakery company’s shareholders. That meeting is expected to be held in early April.
The deal is already approved by the boards of both Canada Bread and Grupo Bimbo but will need at least 66.67 per cent of votes cast by Canada Bread shareholders, as well as court approval and approvals from Canadian and U.S. competition regulators. Bimbo and Maple Leaf both said they expect the deal to close in the second quarter of 2014.
Maple Leaf CEO Michael McCain noted Wednesday that Canada Bread and Bimbo have “little overlap in our geographic markets,” making for “a highly complementary fit with our bakery operations.”
Maple Leaf announced last Oct. 19 it would explore “strategic alternatives” for its Canada Bread stake. Since then, the company said Wednesday, it has gone through an “exhaustive” process aiming to “maximize the value” of Canada Bread — and its advisors find the Bimbo offer to be “fair, from a financial point of view” to minority shareholders. [Related story]
Bimbo’s $72 per share offer tops the closing price for Canada Bread shares as of last Oct. 18 by 31 per cent, the companies noted Wednesday.
Canada Bread, which booked profit of $74.2 million on $1.567 billion in sales in fiscal 2012, employs about 5,400 people in Canada, the U.S. and the U.K. In Canada it operates 25 bakeries and the country’s biggest direct store delivery network for fresh bakery goods, reaching over 41,000 points of sale.
Its fresh bakery business includes breads, rolls, flatbreads, artisan breads, sweet goods and snack cakes, sold under the Dempster’s, Villaggio, POM, Bon Matin and Ben’s brand names, as well as the Olivieri line of fresh pasta and sauce products. The fresh division in Canada operates 21 bakeries in seven provinces.
Its frozen bakery division, meanwhile, makes and distributes frozen unbaked, par-baked and fully-baked bread products in North America, including the California Goldminer and Tenderflake brands, and makes agels, croissants and specialty breads in the U.K., mainly under the New York Bakery Co. brand name. The division’s Canadian operations include three Toronto bakeries and one in Calgary.
Canada Bread dates back to 1911, when it was formed in a merger of five different companies. It took over the Olivieri pasta and sauces business in 1988, and added Hamilton-based Bella Pasta and the U.S. bakery operations of Pioneer French Bakery and Cambridge Frozen Bakery in 1996.
Grupo Bimbo, which today bills itself as “the most important baking company in the world,” said the deal will allow it to extend its presence in Canada and the U.K., and to expand its distribution networks in the U.S., where its brands already include Bimbo, Sara Lee, Oroweat, Arnold, Brownberry and others.
“We are pleased that, in coincidence with the 20th anniversary of the entry into force of (the North American Free Trade Agreement), Grupo Bimbo is announcing this important investment that involves all three members of the commercial treaty,” Bimbo CEO Daniel Servitje said Wednesday in a release.
“This clearly reflects the strength of our commercial relationship and the integration different industries have reached across North America.”
For Maple Leaf’s part, the company noted it’s now entered the “peak phase” of its prepared meats strategy, in which six previously-announced plant closures are still to be completed by the end of this year, on the way to “establishing a low-cost, highly efficient manufacturing and distribution network.” [Related story]
In tandem with “poor protein market conditions,” the company’s transition has “significantly impacted” its 2013 earnings, particularly in its fourth quarter, but it expects next year to see “significant benefits from increased productivity and lower overhead and operating costs.”
Proceeds from Maple Leaf’s share of the Canada Bread sale are to go toward “some combination of debt repayment, supporting growth in its consumer packaged meats business and return to shareholders,” the company said. — AGCanada.com Network