Aryzta Dismisses Shareholder’s Plan for Smaller Capital Increase

Swiss-Irish baker Aryzta stood by its plan to raise EUR800m (USD926m) in new equity to meet its liquidity and financing needs. The company, which produces buns for McDonald’s, criticized a proposal by its biggest shareholder, Cobas Asset Management, to raise only half that amount as inadequate and risky.

On Monday, Cobas Asset Management, which has a 14.5% stake in Aryzta company, put forward an alternative plan for a EUR400m euro capital increase and the sale of non-core assets it said could raise a further EUR250m.

“The board of directors and executive management of Aryzta remains firm and unanimous that EUR800m of equity capital is required to reduce its excessive debt levels, strengthen its balance sheet and provide the necessary liquidity and working capital funding to deliver on its multi-year turnaround plan,” the company said in a statement on Tuesday.

The board of directors also said that the Cobas proposal is inadequate and presents significant execution risk for shareholders. Aryzta said that while its own proposal for an EUR800m capital increase was fully underwritten, the 400m capital hike proposed by Cobas was not underwritten and there was no guarantee it would be possible to underwrite it given the board’s concerns.

Aryzta said the capital increase proposed by the board could be completed within approximately three weeks if it was approved at the annual general meeting on November, 1, and so presented a much lower execution risk than Cobas’s proposal.

“Furthermore, the capital raise needs to be a one-time transaction to fix the balance sheet, while a staged capital raise, as suggested by Cobas, would add significant commercial and financial uncertainty,” Aryzta said.

Earlier on Tuesday, proxy adviser ISS had recommended that shareholders reject the capital increase proposed by the board given Cobas’s resistance.