The potential sale of Aryzta to a unit of US hedge fund Elliott Management was thrown into doubt on Wednesday as a group of dissident shareholders scored a boardroom coup by securing shareholder approval to install a new chairman, who is against a disposal.
The embattled Swiss-Irish baked goods group said last week that it is in advanced talks to be acquired by Elliott Advisors (UK).
At an extraordinary general meeting (egm) in Zurich on Wednesday, the rebel shareholders, led by Swiss investor Veraison, who own more than 20 per cent of the company, secured 96.6 per cent backing from voters for their candidate for chairman, Urs Jordi, to join the board. Shareholders also backed Mr Jordi, the former head of Hiestand International, which merged with Irish group IAWS in 2008 to create Aryzta, to become the new chairman.
“It would certainly be the worst point in time to sell the company right now,” Mr Jordi told the meeting. “We need to streamline our organisation. We want to push forward innovation.”
Veraison and Aryzta’s largest shareholder, Spain-based Cobas Asset Management, declared on May 13th that they had joined forces to press for ways to enhance value for investors, following a sharp slump in its stock market value in recent years. Aryzta announced on the same day that it had hired investment bank Rothschild to carry out a “strategic review” of the business. This ultimately led to unsolicited bid approaches, including the one from Elliott, which is led by billionaire Paul Singer.
On May 21st, the Veraison-led group called on Aryzta to hold an egm to consider its proposals that the company's chairman, Gary McGann, and three other non-executives, Dan Flinter, Annette Flynn and Rolf Watter, be removed from the board and replaced by its nominees. They included Mr Jordi, Heiner Kamps, founder of German bakery group Kamps, and Armin Bieri, the former chief executive of Aryzta Switzerland.
Mr Flinter and Mr Watter said in July that they would be retiring at the egm, regardless of the outcome, while Mr McGann announced last month that he would also step down. Ms Flynn said on Wednesday, hours before the meeting, that she would resign from the board.
Shareholders voted Mr Kamps and Mr Bieri on to the board at the egm. The Veraison-led group also secured investor backing to remove Aryzta chief executive Kevin Toland from the board in order to focus on his executive function as group CEO. Mr Toland has committed to remaining with the group, Mr Watter told the meeting.
Pulled out
Meanwhile, Aryzta’s choice of successor of successor to Mr McGann, Andreas Schmid, the former head of Swiss-Belgian chocolate giant Barry Callebaut, pulled out of the race on Tuesday.
The overhaul means that Aryzta no longer has any Irish board members as it continues to weigh its future. However, it has resulted in a higher weighting of non-executives with baking sector experience.
A spokeswoman for Elliott Advisers (UK)declined to comment on whether the boardroom changes will affect its appetite for a deal.
The egm was chaired by outgoing director, Rolf Watter, with Mr McGann and other Irish non-executives and Mr Toland joining by conference call due to Covid-19 restrictions and what were described as “practical and personal reasons”.
Mr McGann took over as chairman of the already-ailing Aryzta group in late 2016 and set about restoring its fortunes through a restructuring plan driven by his hire, Mr Toland.
Since late 2017, the pair have overseen almost €400 million of asset sales to reduce net debt, and pursued a cost-cutting programme designed to deliver €200 million of savings in the three years to July 2021.
Aryzta has a market value of about €730 million, with the stock having lost most of its value since the company raised about €800 million in an emergency share sale in late 2018.
Halt a decline
The group, which owns the Cuisine de France and Otis Spunkmeyer labels, has been struggling to halt a decline in earnings, particularly in the US, and negative investor sentiment towards its complex capital structure.
The Veraison-led group of investors had previously called on Aryzta to sell off a further €600 million of assets to reduce debt and “return the business to profitable growth”. Speculation has centred around a potential sale of the US business.
Addressing the egm, Mr McGann said: “It would be difficult to overstate the challenges faced by Kevin and his senior team and the circumstances inherited by them – ranging from cultural, structural, commercial, operational and strategic issues, all of which needed serious attention and in a number of cases deep remediation.”
“Significant progress has been made on all fronts in executing a leadership strategy in global bakery. I acknowledge that the financial turnaround has been slower than you had expected and we had hoped for, and that significant further work is needed, particularly in one of the regions, which is now underway.”
The outgoing chairman reiterated his view, first highlighted in a shareholder letter last month, there is no “silver bullet” to fix Aryzta.
“The market is always slow to re-rate a company that has come through such a traumatic period and needing such a level of renewal in so many aspects of the business,” he said. “I do, however, believe that if we keep doing the right things, executed well and in the context of the right strategy, the market will eventually reward it.”
