Shareholders in troubled food group Aryzta are voting Thursday on a 900 million Swiss franc (€790 million) fundraising that has drawn fire from the company's largest shareholder.
Shares in the Irish-Swiss group were suspended from trading as the company published the final terms of the rights issue ahead of the meeting of shareholders outside Zurich.
It intends to issue 900,184,940 shares at a price of one Swiss franc apiece. That is a discount of more than 80 per cent to the 9.34 Swiss francs at which the baked goods groups shares were trading.
The price was a surprise to analysts. “Our worst case scenario was based on a capital increase at CHF2 per share,” Vontobel analyst Jean-Philippe Bertschy said. “The dilution is substantial, as is the downside to current share price levels.
“If the capital increase goes through, management will be under massive pressure to execute the plan in a timely manner,” Mr Bertschy said, reaffirming his reduce recommendation on stock.
"The dilution caused by the large capital increase is the lesser evil than the increased risk of total loss for the shareholder," Zuercher Kantonalbank (ZKB) analyst Patrik Schwendimann writes in separate note, saying the fundraise was "urgently needed".
“The shares will typically come under pressure as a result of the trading in subscription rights,” adds the ZKB analyst, who has a market perform recommendation on Aryzta.
The proceeds of the proposed rights issues, at CHF900 million compares to Aryzta’s current market cap of CHF872 million. The group’s shares have given up 75 per cent of their value this year.
If approved by the annual general meeting, shareholders will be given the right to subscribe for 10 of the new shares for every Aryzta share they own on Tuesday next, November 6th.
The company, which makes buns for fast food group McDonalds among other clients, confirmed that it plans to use the proceeds from the capital raise to repay debt, and to fund required investments under the Project Renew programme and for general corporate purposes.
“The sizing of the capital increase reflects Aryzta’s requirements to obtain the necessary strategic and financial flexibility to implement its strategy, strengthen its balance sheet, provide funding to execute Project Renew and have the ability to maximise the value of non-core asset disposals,” the company said in a statement. – additional reporting Bloomberg
