February 17, 2011
By Staff Reporter
The price includes $340 million cash with the rest of the deal made up of the U.S. firm’s debt, which IAWS will now swallow. The move was warmly greeted by investors in Ireland, with the firm’s share price rising almost 7 percent on the news.
The deal increases the company’s foothold in the U.S., where it already owns La Brea, which specializes in artisan breads, and Cuisine de France which supplies French-style bakery products. The Otis Spunkmeyer acquisition gives it access to new markets at the sweet end of the bakery market.
In a statement, IAWS Group plc CEO Owen Killian said: “Otis Spunkmeyer is an exceptional company with an outstanding performance record, a national distribution platform and a superb product range. It has proven management that is committed to the business and that shares IAWS’ passion for customer service, product innovation and quality. Otis’ product categories are complementary with our existing US business in both retail and food service channels. The acquisition is an excellent fit and offers IAWS a strong platform for future growth in the US market.”
Otis, which boasts 62,000 customers, makes pre-baked and packaged cookies, cookie dough, muffins, bagels and brownies. According to the IAWS statement, the firm has a “unique flexible coast-to-coast supply chain to its 62,000 customers, offering direct delivery through 52 nationwide sales centers”, while also supplying customers with ovens, merchandising, display cases and point of sale material.
It has over 55,000 ovens operating in the U.S. in foodservice and retail outlets, and operates four “strategically located” manufacturing facilities in California, Texas, South Carolina and Pennsylvania. It generated revenue of $335 million for the year to 2005 and had an operating profit of $29.1 million, boasting growth in net sales of 9 percent annually from 2001. IAWS said the strong presence in the sweet end of the market will complement its existing La Brea Bakery business.
“In the year to July 2006 La Brea Bakery increased sales by over 26 per cent and is the leading Artisan bread brand in the USA. The Group will now have a major brand presence in two niche growth segments of the specialty bakery market. The acquisition will increase IAWS sales in the U.S. by 200 percent to over $530 million, bringing scale to these operations,” the company added.
IAWS had looked at buying Otis before, but believed it could have been biting off more than it could chew following the purchase of La Brea in 2001, and the establishment of a joint venture the same year with Tim Hortons, to provide donuts and Timbits to the Tim Hortons estate of coffee and baked-goods stores. The joint venture has a manufacturing base in Ontario, Canada and supplies the entire estate of Tim Hortons stores in Canada and the USA.
Otis Spunkmeyer was bought in a $275 million management buy-out backed by private equity group Code Hennessy and Simmons in 2002. Otis has invested heavily since, buying Ven-Merkel inc which manufactures frozen cookie products. The current takeover deal, which is due to conclude later this month, will allow for a further $25 million to be paid to option and stock holders depending on certain performance milestones being met.
This is provided as an incentive to the existing management team led by Otis Spunlmeyer CEO John Schiavo, who remains with the business as well as the rest of the present senior management.
IAWS has other U.S. operations, owning Chicago-based Cuisine de France, which specializes in French-style bakery products supplied to convenience chains, supermarkets, delis and produce markets in Chicago and surrounding states. The firm has similar operations in the UK and Ireland, while in the US its products include Parisian bread, French baguettes, McNamees wheaten loaf, as well as sweet products such as apple lattice squares and iced muffins. IAWS will be funding the acquisition with a debt provision will leave the group with a war-chest of around $200 million for further buys, although these are thought unlikely for some time for the Otis deal, which is the group’s largest ever.
The move is a spectacular one for the Irish group, which roots deep in Irish agriculture, beginning life in 1897 as the Irish Agricultural Wholesalers Society. Describing itself as an an international Food and Agribusiness group, it has “lifestyle food” operations in niche bakery products in Ireland, the UK, France, the US and Canada, servicing over 50,00 customers. It also owns meat-processing businesses in Ireand such as Carroll and Shamrock, and is a leading provider in Ireland and the UK in the animal feed, fertilizer and marine protein sector, owning well-known brands such as Goulding. IAWS Group plc is listed on the Dublin and London Stock Exchanges and has been publicly quoted since 1988.