(Bloomberg) -- Swiss baker Aryzta AG is planning a share sale to raise as much as 800 million euros ($911 million) as the firm struggles to lower its debt after multiple profit warnings.
The sale, which will strengthen Aryzta’s balance sheet, is planned for the fourth quarter, the Zurich-based company said in a statement Monday after Bloomberg News first reported the sale. The shares initially rose but then fell as much as 7.6 percent in early Zurich trading, giving the company a market value of about 763 million Swiss francs ($767 million).
“It wasn’t our preferred choice,” Chief Executive Officer Kevin Toland said in a call with analysts. “The real issue is we need more time and more space and more flexibility to implement what I believe is a good winning strategy for our business.”
Aryzta has announced three profit warnings in 18 months, with the latest one in May, and had repeatedly said it didn’t need a capital increase. The stock had fallen for nine straight sessions, losing 40 percent from July 27 through Friday, on concern the company would have to sell shares to alleviate its debt levels. A heatwave in Europe has led to soaring grain prices, adding to the company’s woes as the new management team struggles to turn around a business that’s been weighed down by lost contracts and mounting debt.
“While the balance sheet will be strengthened, question marks about structural strategic issues and operations remain unanswered,” Jean-Philippe Bertschy, an analyst at Bank Vontobel AG, wrote in a note. He raised his rating on the stock to hold from reduce.
Fintan Ryan, an analyst at Berenberg, wrote in a note that although details remain to be confirmed, “this capital raise should provide good support for management to proceed with trying to turn around the structurally over-capacity business and steady the ship on profitability.”
Aryzta’s 400 million francs of perpetual notes jumped 2.5 cents on the euro to 73 cents on Monday after the company announced plans to sell shares to reduce its debt. It’s the biggest intraday increase in a month, according to data compiled by Bloomberg.
The company confirmed it plans to raise at least 450 million euros from selling assets, and said the process of selling its stake in French frozen-foods company Picard is ongoing. Chief Financial Officer Frederic Pflanz said in March that Aryzta planned to raise that amount by the end of the fiscal year that finished in July.
“We’re determined to exit at fair value,” Toland said. “That’s taken us longer than we would like.”
Aryzta’s fourth-quarter results were in line with expectations, the company said, and earnings for the full year were 296 million euros to 304 million euros. It also said it was in compliance with its covenants.
Aryzta, which supplies McDonald’s Corp. with hamburger buns in some markets, said it will provide further details on the capital increase when it reports full-year results on Oct. 1.
(Updates with bond move in seventh paragraph, CEO comment in ninth paragraph.)
--With assistance from Albertina Torsoli and Irene García Pérez.
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