Bimbo to buy U.S. baking assets, brands of Weston

by Jeff Gelski
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TORONTO — Grupo Bimbo S.A.B. de C.V. has agreed to buy the U.S. fresh bread and baked foods business of Dunedin Holdings, S.a.r.l., a subsidiary of George Weston Ltd., for about $2.4 billion, which includes about $125 million of interest bearing assets. Announced on Dec. 10, the deal will give Bimbo the Arnold, Brownberry, Entenmann’s, Freihofer, Stroehman and Thomas’ brand names in the United States.

"The transaction is the most important one in Grupo Bimbo’s history and one of the largest in the bread industry," Daniel Servite, chief executive officer, said of 63-year-old Grupo Bimbo S.A.B. de C.V.

The assets being sold are part of Weston Foods, Inc., Dunedin’s principal U.S. operating subsidiary. The assets being sold contributed $2.2 billion of sales and $255 million of EBITDA to Weston’s consolidated results for the 52 weeks ended Oct. 4. Dunedin will retain its other U.S. baking interests, including Interbake Foods and Maplehurst Bakeries.

After the acquisition is completed, Bimbo Bakeries USA will own six of the top 12 fresh bread brands in the United States, Mr. Servitje said. Bimbo Bakeries USA also will have about $3.9 billion in annual revenue, $300 million in annual EBITDA, 35 plants, more than 15,000 employees and more than 7,000 routes, Mr. Servitje said.

Gary Prince, currently president of Weston Foods, Inc., will become president of Bimbo Bakeries U.S.A.

"This will represent an exciting opportunity, not just for the new company and its associates, but for our consumers, customers and markets," Mr. Prince said. "The creation of one of the leading U.S. bakers, with attractive brands and a true national footprint backed by Grupo Bimbo’s global presence, will allow us to better serve our customers and the millions who enjoy our products every day."

Reynaldo Reyna, currently president of Bimbo Bakeries USA, will become executive vice-president of western operations for Bimbo Bakeries USA. Fred Penny, currently executive vice-president of Weston Foods, will become executive vice-president of eastern operations for Bimbo Bakeries USA.

Despite a troubled economy throughout the world, the timing of the acquisition makes sense for two reasons, Mr. Servitje said. People are eating at restaurants less often and buying food at retail stores, and people continue to buy baked foods for whole grain benefits.

The transaction is expected to close in the first quarter of 2009. The outside date for the completion of the transaction is June 30, 2009. It is subject to approval by a majority of Grupo Bimbo’s shareholders. If Grupo Bimbo fails to complete the transaction in certain circumstances, Dunedin will be entitled to $100 million.

Grupo Bimbo’s financing of $2.3 billion will be structured through a one-year $600 million bridge facility, a three-year $900 million term loan and a five-year $800 million term loan.

George Weston Ltd.’s stock price on the Toronto Stock Exchange was up about 2.3% to C$62.31 in the mid-afternoon of Dec. 10.

The transaction could be viewed as the second part of a deal consummated in January 2002. Grupo Bimbo greatly expanded its presence in the U.S. market at that time by acquiring the western U.S. baking business of George Weston for $610 million. Those assets, acquired a few months earlier by Weston from Unilever, gave Bimbo access to the Entenmann’s, Thomas’, Oroweat and Boboli brands in the western United States. With the latest transaction, Bimbo will be acquiring the other baking assets acquired by Weston from Unilever as well as other fresh baking assets, most notably Stroehmann, already owned by Weston.

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