Urs Jordi was barely in the door of Hiestand, a Swiss par-baked bread-maker, in 1996 when a call came from the company’s founder. Fredy Hiestand, who had reimagined the way croissants could be produced in bulk with deep-freeze techniques, had a problem with the company’s joint venture in Poland. He gave Jordi what was supposed to be a two-week job to extract the company out of the country.
“The two weeks became six years,” recalls Jordi, in an interview with The Irish Times. “We took out the joint venture partners and stopped doing business with unprofitable customers. But the more we cleaned up the operation the more money it started to make. By 1998-99 it was the most profitable company in the group.”
Jordi, now 57, has faced a bigger task in recent times: turning around Aryzta, the company formed in 2008 through Hiestand’s merger with IAWS, the Dublin-listed owners of Cuisine de France, which had lost its way.
Having rejoined Aryzta in late 2020, seven years after walking away from what had become a large debt-fuelled mergers and acquisitions (M&A) vehicle, Jordi has focused ever since on cutting back its asset base and its unsustainably high borrowings and firing up the ovens to cater for evolving tastes. Fewer commodities breads and more speciality offerings, like sourdough, high-protein, and clean-label products. And a much greater focus on projects to reduce carbon emissions – a key priority for customers and shareholders alike.
“For me there was too much financial engineering in the past,” he says. “I’m a baker. I grew up in a bakery. In order to be successful long term in this business you need to innovate, you need to be a leader, you need to remain relevant.”
Results are beginning to show. The company – which supplies everyone from the likes of McDonald’s and Subway to Lidl, Aldi and Dunnes Stores – eked out its first net profit in six years in its last financial period to the end of July last year. It may have amounted to only €900,000 but it was an important milestone following the €2.73 billion of losses racked up over the previous half decade, driven by impairment charges against assets acquired during its deals binge and disposal losses.
The company is on track to post a profit of about €65 million for the financial period that will end in a couple of weeks, according to the consensus view among analysts. Jordi says that many of the company’s brands, which were traditionally recognised for being ahead of market trends, are enjoying a new lease of life.
“You need to drive this process systematically. It needs to become a habit. And a company in this business that is not focused on driving innovation every day will fall asleep,” he says in our interview at Aryzta’s Dublin office in Grange Castle in southwest Dublin, attached to its Irish baking hub, which produces up to 80,000 tonnes of bread and pastries a year for more than 3,000 customers and employs more than 500 people.
Cuisine de France remains “a golden asset” that is going through something of a “revival”, says Jordi, following recent investments in sourdough and speciality breads, like its ancient grain bloomer and cheese and jalapeño loaf that sit alongside its original Parisian baguettes.
***
Baking is in Jordi’s blood. His parents owned a bakery in his native Muhen, a small, German-speaking town between Zurich and Bern. The morning routine was as orderly as you would expect from the home of precision clockwork. “My father would get up around 2.30am to start baking bread with one or two employees. At 5.30am the shop was opened by my mother. There were four kids. Everybody had something to do.”
Jordi, the youngest and the only boy in the family, started a baking apprenticeship with a focus on commerce on leaving school, taking him to several bakeries in the German and French parts of Switzerland.
In 1989, at the age of 24, he joined a food production unit of Swiss supermarket chain Migros, before being hired by Hiestand seven years later. The Polish assignment would propel Jordi to the role of chief operating officer in early 2003, months before IAWS acquired an initial 22 per cent stake in Hiestand from its founder.
He became group chief executive in early 2007 – 18 months before IAWS, under then CEO Owen Killian, increased its stake in the business to 64 per cent (through the purchase of a block of shares owned by private equity firm Lion Capital) and engineered the merger to create Arysta. The group name was derived from the word arista, Latin for the tip of an ear of wheat.
From the outset Jordi thought the merger was a “good one” even though he had had designs on Hiestand itself in time becoming an acquirer rather than the target it became. The deal combined IAWS’s Cuisine de France brand and then recently acquired La Brea Bakery and cookie maker Otis Spunkmeyer in the US with Hiestand’s European brands, including Coup de Pates pastries in France.
Five years later Jordi quit as CEO of Aryzta Food Europe & Asia Pacific. He does not hold back on how he felt Aryzta had lost its way before he left. “I felt that the company in those days was more managed as an M&A machine, with far too little [focus] on how an industrial producer like this should be managed,” he said.
The stock market had other thoughts. Aryzta’s share price advanced about 40 per cent in the 12 months after he quit, continuing what would become a virtually unbroken seven-year run. However, investors started to get nervous in March 2015 when the company posted weaker-than-expected results and followed up two weeks later with the questionable purchase of a non-controlling 49 per cent stake in French frozen foods firm Picard.
“The Picard thing I never understood,” said Jordi. “It’s a very good company but it’s a completely different business. It’s a retail business. We’re mainly a [business-to-business] private-label servant to our customers. We should never be a potential competitor against our customers. That’s an absolute no-no.”
Things went from bad to worse the following January when it emerged that the Otis Spunkmeyer unit in the US was losing big contracts from food groups that outsourced production to it after Aryzta decided to go head-to-head with them with products on retail shelves.
By early 2017 Killian and some of his key lieutenants were gone. Gary McGann, a grandee of Irish business who previously led Aer Lingus and cardboard box-maker Smurfit Kappa, was subsequently hired to try to turn the ship around. He brought in former DAA chief Kevin Toland as his CEO.
The duo would raise hundreds of millions of euro from disposals, including most of Aryzta’s stake in Picard, its former La Rousse Foods unit in Ireland, two facilities in the US, and a 50 per cent stake in a UK flatbreads business. They also launched an €800 million equity raise in late 2018 in a highly-dilutive deal that was viewed by many as coming way too late.
McGann suggested in early 2019 that he might not have taken on the Aryzta role had he known how bad things were. “I’d like to think I’d be Braveheart and go in, but honestly I don’t know,” he said at the time.
“Gary is a very experienced warhorse for difficult moments,” says Jordi. “But he probably didn’t expect the company to be in the shape it was in when he joined. Also Gary was not an animal of the industry. It’s really important in this industry to understand its dynamics, to smell what is looming next month or next year – like where commodities are going, what’s happening in the labour market, and what customers will be looking for next.”
In April 2020, a month after Covid-19 sent the western world into lockdown, hitting bread orders from quick-service restaurants and the catering industry, Aryzta attracted the unwelcome attention of a fresh activist investor.
Zurich-based Veraison Capital had joined forces with another dissident on the company’s shareholder register, Cobas Asset Management, and called for the company to “rebuild” and find ways to “create value for shareholders again”. They controlled about almost 18 per cent of the stock between them at the time.
Jordi, by then focused on family property business in Switzerland and an interest in a pharmaceutical and cosmetics sales company in Poland, got a call one Saturday in early May from Gregor Greber, the founder and then head of Veraison, while he was on a bike tour in Switzerland. “He told me about his plan,” recalls Jordi. “And my answer was, ‘this went too far. It’s too late… You will fail’.”
Still, Greber convinced Jordi to meet a group of concerned Swiss shareholders in Aryzta a few days later. Within weeks Veraison and Cobas had convinced Jordi to put his name forward as candidate for chairman as the activists called for an extraordinary general meeting (egm) to remove several Irish directors, including McGann and Toland, from the board.
It culminated in a partial boardroom coup at an egm in Zurich that September, which moved the group’s centre of gravity from Dublin to Switzerland. By that stage, however, the company was in talks to sell itself to a unit of Elliott Management, the New York hedge fund founded by billionaire Paul Singer.
Jordi told the meeting at which he was installed as the new chairman that there could not be a worse time to sell Aryzta. And he presided over a decision two months later – after the completion of a boardroom overhaul at a subsequent annual general meeting (agm) – to reject an eventual 800 million Swiss franc (€825m), or ChF0.8 per share, bid for the company. By then he was also interim CEO after Toland left the company.
Aryzta struck a deal to sell its troubled North American business to US private equity firm Lindsay Goldberg the following March for $850 million. It disposed of its Brazilian business months later.
Group net debt – including a chunk of hybrid debt-equity instruments that don’t have a repayment date but where interest costs had been rolling up for years – has fallen from €1.89 billion in mid-2020, or 7.3 times ebitda, to an estimated figure of just over €1 billion or a ratio of 3.8 times earnings.
Aryzta has bought back €250 million of its hybrid notes since last summer, leaving ChF590 million of such debt outstanding.
“Aryzta is in profit mode and generating good levels of cash again. The best value-creating activity we can do now is to continue to tackle the hybrids, to either eliminate them or push them down over time,” he said. “We are still an overleveraged company.”
Jordi’s target is to reduce the debt ratio to about three times earnings by 2025.
Shares in Aryzta are currently trading at close to twice the price of the Elliot takeover offer. There are two clear issues limiting further upside for now, according to observers: the company’s remaining high level of borrowings at a time of heightened interest rates; and the prospect of a recent spike in food (Aryzta had managed to hike its prices by 19 per cent in the first half of its financial year) giving way to deflation and customer pressure for price cuts.
Jordi’s ongoing dual role as chairman and interim CEO is also a concern for some investors and their corporate governance advisers. He says shareholder advisory firms are prepared to put up with the current situation until the end of next year as the company continues what has been a fruitless search for a new top executive to date. “We have a clear idea of the profile that’s needed. There is no room for experiments,” he said. “There is a small group of favourites.” He has no intention of giving up the chair any time soon, however.
His management style is simple, he says. “My job is to make sure that every single business unit is managed by a group of people who are able to understand the dynamics of their business, where it’s going, and the importance of innovation. I don’t believe in hierarchy. I believe in competence.”
While the focus for now is on organic growth and cutting debt, Jordi says Aryzta will eventually return to the acquisition trail – focusing on bolt-on deals that complement its existing footprint. Many of the bakery players in Europe are currently owned by families who lack natural successors, or are in the hands of some leveraged private equity owners at a time of rising interest rates.
“This consolidation phase is coming and we have to be a protagonist in it,” says Jordi. “It’s difficult for us to do something now. We still need to fill our bank accounts and decrease our debt. But I think within the next two or three years there will be tectonic movements in our industry in Europe.”
C.V.:
Name: Urs Jordi
Age: 57
Position: Chairman and interim chief executive of Aryzta
Lives: Close to his native town of Muhen, Switzerland
Family: Married to Magdalena, they have two sons, Jakub (23) and Flavio (15)
Hobbies: He enjoys spending time with family and friends and keeping fit by running, skiing, volleyball and horse riding (one of his horses is an Irish breed, the other is Swiss)
Something you might expect: Given his family’s bakery background, he values good quality, healthy food, especially oven-fresh artisan bread
Something that might surprise: He speaks fluent Polish at home with his wife and sons as Magdalena is Polish
