10 Dec Bimbo to buy George Weston unit for $2.38 billion
Excerpt of Article from Reuters
By Cyntia Barrera Diaz
MEXICO CITY (Reuters) – Mexico’s Bimbo is buying the U.S. breadmaking unit of Canada’s George Weston Ltd for $2.38 billion, extending its U.S. presence coast to coast with one of the biggest acquisitions in its history.
Shares of Bimbo fell 3.39 percent to close at 59 pesos, bucking a firmer Mexican market, after the breadmaker said on Wednesday it has agreed to buy Weston Foods Inc in a credit-financed deal.
George Weston shares rose 2.4 percent to C$62.40 in Toronto.
The transaction is expected to close in the first quarter, subject to regulatory approval.
Bimbo is one of the world’s top breadmakers. The acquisition will complement its 2002 purchase of George Weston’s breadmaking operations in the western United States for $610 million.
Weston Foods, with sales of nearly $2.2 billion in the year ended October 4, will give Bimbo access to the Boboli, Brownberry, Entenmann’s, Freihofer’s, Stroehmann and Thomas’ brands of breads, rolls, muffins and bagels.
Bimbo Chief Executive Daniel Servitje told analysts during a conference call that its Bimbo Bakeries USA unit would end 2008 with sales of $1.6 billion. The 2007 figure was not immediately available.
The company expects $7.5 billion in total sales for 2008 and $10 billion during 2009, Chief Financial Officer Guillermo Quiroz told reporters on Wednesday.
“We have eaten all we could eat and for a great while we will concentrate in digesting it,” Quiroz said, downplaying another major acquisition in the near term.
EYEING DEBT, DESPITE TURMOIL
Bimbo will finance the Weston Foods purchase with long-term credit of $1.7 billion, in two tranches, and a $600 million bridge loan with a one-year maturity.
Treasurer Roberto Cejudo told Reuters the financing would be two-thirds denominated in pesos and the rest in dollars.
The 3-year, $900 million tranche would have a spread of 250 basis points over TIIE, the Mexican benchmark commercial interest rate, or Libor. The 5-year, $800 million tranche would yield 300 basis points above TIIE or Libor, Cejudo said.
The benchmark used would depend on whether the debt is issued in pesos or dollars, or a combination of both, based on market conditions.
The bridge loan will carry a spread of 175 basis points.
Bimbo said last week it was in talks with George Weston, prompting Standard & Poor’s to place its ratings on Bimbo’s debt on credit watch with negative implications, citing concerns the deal would be debt-financed. S&P analysts had no immediate comment on Wednesday.
Moody’s Investors Service on Wednesday placed Bimbo’s debt ratings on review for possible downgrade.
“We expect the transaction… to weaken credit metrics,” Moody’s Vice President Sebastian Hofmeister said in a statement.
Bimbo sells its products, ranging from pastries to peanuts, in Latin America, Europe and Asia.
Analysts say George Weston could use proceeds from the sale to Bimbo to buy the 39.1 percent of Loblaw Cos, Canada’s biggest grocer, that it does not already own. This is the second divestiture from the Canadian firm this month, following last week’s sale of Nielson Diary to Saputo Inc
Atlas Advisors acted as exclusive financial advisor to Grupo Bimbo in connection with this transaction.
Atlas Advisors is the marketing name for Atlas Advisors, LLC and Atlas Strategic Advisors, LLC. Atlas Strategic Advisors, LLC provides financial advisory services in connection with mergers, acquisitions and other similar transactions. Atlas Strategic Advisors, LLC is a wholly owned subsidiary of Atlas Advisors, LLC and a member of the FINRA.
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