Shareholders in Aryzta have narrowly approved a proposal by the company to raise €800m in fresh capital, which Aryzta management will use to deliver a multi-year turnaround plan for the embattled bakery giant.

At last week’s AGM, just under 53% of Aryzta shareholders voted in favour of the plan to raise €800m, which will be raised by way of a rights issue and is likely to lead to a significant dilution of existing shareholder investments.

The €800m needed for the turnaround plan proposed by Aryzta management has faced stiff opposition from a number of large shareholders in Aryzta in the weeks leading up to the AGM and is evidenced by the 47% of shareholders that voted against the proposal.

Aryzta will use the €800m to reduce debt by €500m, fund a €150m cost-cutting programme called Project Renew as well as €100m for working capital.

While the result of the vote is hardly a ringing endorsement of the plan, Aryzta CEO Kevin Toland now must go out and sell the 900m new shares to investors.

Shareholders, including many of the co-ops, are now looking at a significant dilution of their shares. It is unclear how many may take up the rights issue.

Ultimately, it would dilute shareholdings by 90% if investors decide not to go ahead and exercise their rights. Shares slumped 23% on the announcement of the capital raise plan.