Aryzta confirms takeover approaches as Gary McGann announces his exit

Speciality bakery giant Aryzta has confirmed it has received a number of takeover offers from third parties and said it will hold a shareholder emergency general meeting (EGM) on 16 September to discuss these approaches.

In a letter to shareholders on Monday, Aryzta chair Gary McGann said certain third parties had expressed an “unsolicited interest in acquiring the company’s entire issued share capital”.

Aryzta shares have shot up by almost 25% in value

“The proposed timing of the EGM is primarily intended to provide the opportunity to allow the strategic review process, and the assessment of any possible offer which may be forthcoming from third parties in connection with that process, to be sufficiently advanced to enable the board to frame an appropriate recommendation (with the advice of its financial advisers),” said McGann in his letter to shareholders.

Aryzta shares have shot up by almost 25% in value to €0.54 since the news broke on Monday.

Resignation

McGann also announced his intention to retire as chair of Aryzta at the EGM in September or at an earlier date subject to any agreed takeover of the company. The former CEO of Smurfit Kappa has been under increasing pressure from a significant cohort of shareholders who have been actively pushing for his removal, along with the removal of four other board members.

Alongside McGann, Aryzta board members Dan Flinter and Rolf Watter have said they will also resign their positions from the Aryzta board.

A rebel shareholder group, led by Swiss asset management firm Veraison and Madrid-based Cobas asset management, has called for the removal of the four longest-serving members of the current Aryzta board, including McGann, Flinter and Watter.

The group wants to see the sale of a further €600m in assets by Aryzta to cut its debt to a more manageable level

The shareholder group, which controls just over 20% of the shares in Aryzta, argues that the current board of the bakery giant has presided over a whole series of strategic errors and change is needed.

The group wants to see the sale of a further €600m in assets by Aryzta to cut its debt to a more manageable level.

In a recent interview with the Irish Farmers Journal, Veraison co-founder Gregor Greber said the group of shareholders he leads were proposing three of their own nominees to the board of Aryzta, including for the position of chair, that each had first-hand experience of the global bakery industry.

The shareholder group also wants Aryzta chief executive Kevin Toland to stand down from the board to focus on his day-to-day duties as CEO.

Rejected

However, in his letter to shareholders this week, Gary McGann rejected a number of elements of the proposals put forward by Veraison & Co as contrary to the best interests of the company.

In relation to Kevin Toland’s position on the board, McGann says it is “fundamentally important” that the Aryzta boss remains on the company board to allow for appropriate management representation as well as to facilitate the direct and immediate information exchange between the board and senior management.

McGann said the board of Aryzta was not in a position to support the election of these nominees

McGann also took aim at Veraison & Co’s three nominees to the board stating that the group had so far failed to submit these candidates for evaluation by the company’s governance and board nominations committee.

As a result, McGann said the board of Aryzta was not in a position to support the election of these nominees and recommended that shareholders reject the nomination of these candidates at the EGM.

On top of this, McGann argued that if all three individuals proposed by Veraison & Co were elected to the board it would give them over 30% of the membership of the board, despite having just 20% of the company shares, and effectively give the group control of the board.

Whatever the coming weeks and months hold for the future of Aryzta, the relationship between the current board and some of its largest investors is clearly at a very low ebb.

Irish dairy co-ops such as Arrabawn, Aurivo, Centenary Thurles, Dairygold, Kerry Co-op and Tipperary Co-op still hold a significant number of Aryzta shares between them.

The co-ops’ shareholding in Aryzta has been diluted over the years

Combined, Irish dairy co-ops are thought to hold in the region of 1% to 2% of the shares in Aryzta.

The co-ops’ shareholding in Aryzta has been diluted over the years but there could potentially be a cash windfall of up to €12m for the Irish co-ops, depending on the agreed share price Aryzta might be acquired for.

While an exit such as this will not be what co-ops may have hoped for when Aryzta shares were trading at the lofty heights of €70 back in 2014, it is likely to be the best deal they can hope for given the recent plight of the company.