Shares in Swiss-Irish food group Aryzta fell to their lowest level in 18 months after it announced plans to buy a stake in French food retailer Picard, surprising investors, who had thought the company was keen to exit the frozen foods sector.
Aryzta said it had entered into exclusive negotiations to buy a 49 per cent stake in the French brand, which specialises in high-end frozen food, for €447 million from Lion Capital, a private- equity firm based in London.
Under the terms of the deal, Aryzta would maintain an option to acquire 100 per cent stake in the business in three to five years.
The acquisition, if it goes ahead, will be funded from the proceeds of its part sale of agribusiness group Origin and the disposal of its Tullamore-based Carroll Cusine, which look set to net Aryzta an estimated €444 million.
News of the deal, however, sent shares in the Dublin and Zurich-listed company down. They fell 7.8 per cent or €4.75 to €58 in Dublin and by a similar margin in Zurich, their lowest close since September 2013.
Nonetheless, chief executive Owen Killian insisted the investment in Picard was "consistent with Aryzta's strategy of consumer relevancy through diversifying markets and channel positioning".
Picard has delivered consistent revenue, profit and market share growth over 40 years, he added.
The French company sells mostly high-quality French produce through its 930 stores and commands 20 per cent of the country’s frozen food market.
Recently, it has begun to expand internationally, opening stores in Belgium, Italy, Sweden and Japan. The deal would give Aryzta a direct retail presence on the ground for the first time.
The company said it would treat the French group as an associate and that it expected the acquisition to make a net contribution of 3 per cent to underlying earnings per share (EPS), offsetting half of the negative 6 per cent impact of the Origin placement.
Last week, it placed 49 million shares in Origin, some 60 per cent of its stake in the business, on the market, raising more than €404 million. The group will take two seats on the Picard board as part of the deal.
“Other food companies have problems in frozen or are even selling these activities, so the market is a bit irritated by the move,” said Patrik Schwendimann, an analyst at Zuercher Kantonalbank. “The transaction in combination with the Origin sale will reduce earnings per share.”
Vontobel analyst Jean-Philippe Bertschy said: “That move is surprising as Aryzta is expanding in a non- bakery sector and in a saturated market.”
