(Adds Maple Leaf CEO interview, Grupo Bimbo and investor
By Euan Rocha and Rod Nickel
TORONTO/WINNIPEG, Manitoba Feb 12 Mexico's
Grupo Bimbo will buy Canada Bread Company
for C$1.83 billion ($1.66 billion) in cash, Canada Bread said on
Wednesday, allowing the Canadian company's parent Maple Leaf
Foods to focus on its meat business.
Grupo Bimbo, one of the world's largest bread makers, will
pay C$72 for each share of Canada Bread, a 7 percent premium to
the Canadian company's closing price on the Toronto Stock
Exchange on Tuesday.
The purchase builds on Grupo Bimbo's large U.S. acquisitions
in recent years and strengthens its position as a top breadmaker
in North America.
Bimbo has expanded its footprint in recent years, acquiring
Sara Lee Corp's North American bakery business for $959 million
in 2010 and buying Hostess Brands' Beefsteak bread in 2013.
Shares of Canada Bread rose 7.3 percent to C$72.14 in
afternoon trading on the Toronto Stock Exchange, with the stock
having surged 22 percent since October, when food processor
Maple Leaf said it was mulling the sale of its 90 percent stake
in the company. Maple Leaf shares dipped 0.6 percent to C$15.75,
while Grupo Bimbo slipped 1.5 percent to 34.65 pesos in Mexico
In January, Reuters reported that Grupo Bimbo was the top
candidate to buy Canada Bread, after private equity firms KKR &
Co and Bain Capital LLC, and U.S.-based Flowers Foods
Inc - bowed out of the race.
Maple Leaf has sold parts of its businesses as it
restructures under a multi-year plan. It has recently been
upgrading its meat operations as it seeks to boost profits and
better compete with rivals in the United States.
Maple Leaf will use proceeds from the Canada Bread sale to
repay debt and complete upgrades of its meat business before
considering opportunities for growth, and returning capital to
shareholders, Maple Leaf Chief Executive Michael McCain said in
a conference call with analysts.
Bimbo, a family-owned and operated breadmaker, said it will
finance the purchase with cash and by using long-term credit
lines that it already has in place.
Responding to a question about whether Maple Leaf was for
sale, McCain said it was committed to its meat business and saw
growth potential in Canada and elsewhere.
The company has neither sought nor received inquiries from
potential buyers of the meat business since Maple Leaf announced
a review of its Canada Bread stake last October, McCain, Maple
Leaf's biggest shareholder, said in an interview.
Selling Canada Bread is an "extremely positive" move and
sets the stage for Maple Leaf to eventually buy back shares,
said Brian Huen, managing partner of Red Sky Capital Management,
a Maple Leaf shareholder.
Huen said he would not oppose a sale at the right price.
"Frankly, if someone's willing to come in and buy the
protein business and pay C$20, C$21 (a share), I think they have
a fiscal responsibility to sell it."
In December, Canada Bread announced a special dividend of $8
per share, netting Maple Leaf a roughly C$183 million windfall.
The deal has been approved by the boards of both Grupo Bimbo
and Canada Bread, and Maple Leaf has agreed to vote the shares
it controls in favor of the deal.
The transaction still awaits regulatory anti-trust and
foreign investment regulatory approvals.
"We don't expect any problems there," said Bimbo executive
Luis Sampson in a conference call with analysts. "We've been
doing a review and we expect that it's going to go through in a
timely fashion so most of these transactions should happen in
the second quarter."
Maple Leaf was advised by RBC Capital Markets and Centerview
Partners LLC on the Canada Bread sale, while its subsidiary had
engaged CIBC World Markets Inc to act as its financial adviser.
Bimbo said in a separate statement that it was advised by
boutique firm Atlas Advisors, with legal advice from Torys.
Grupo Bimbo was founded in Mexico City in 1945 by Lorenzo
Servitje. Its current Chief Executive Daniel Servitje is a
descendant of the founder and the Servitje families own about 50
percent of the company's stock.
Canada Bread is one of two dominant Canadian bakers, along
with food producer George Weston Ltd, parent of the
Loblaw Cos Ltd grocery chain. In addition to bread sold
under the Dempsters brand, Canada Bread sells other products
under banners such as Ben's, POM and Sunmaid.
($1 = 1.1044 Canadian dollars)
(Additional reporting by Elinor Comlay and Christine Murray in
Mexico City; Editing by Bernadette Baum)