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Potemkin
12-10-2008, 03:04 PM
http://www.bloomberg.com/apps/news?pid=20601086&sid=aLYOLdLcCeYM&refer=news

Grupo Bimbo Buys Weston Bread Unit for $2.4 Billion (Update3)
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By Hugh Collins and Andres R. Martinez

Dec. 10 (Bloomberg) -- Grupo Bimbo SAB, the Mexican producer of Entenmann’s cakes and Oroweat loaves, said it agreed to buy George Weston Ltd.’s baked-goods unit for $2.4 billion amid plans to become the world’s largest breadmaker.

Grupo Bimbo will gain the Arnold, Boboli, Brownberry and Thomas brands, which had sales of $2.2 billion this year through Oct. 4, the company said today in a statement to the Mexico City stock exchange. The Weston Foods Inc. unit has more than 8,000 employees, 22 plants and 4,000 distribution routes, Bimbo said.

Bimbo has spent more than $200 million this year buying companies in Latin America and China to cut its dependence on Mexico. The company became the largest bread maker in Brazil earlier this year after buying 75 percent of Nutrella Alimentos SA and Chief Executive Officer Daniel Servitje has said he aims to become the world’s largest breadmaker within two years.

“This is the most important transaction in the history of Grupo Bimbo, and one of the largest in the history of baking,” Servitje said today in the statement.

Mexico accounted for 67 percent of Grupo Bimbo’s third- quarter sales of 19.03 billion pesos ($1.4 billion) and the U.S. brought in 22 percent. The company makes Tia Rosa tortillas, Entenmann’s cakes, Pan Bimbo, Mrs. Baird’s breads and Boboli pizza ingredients. Bimbo said it expects the deal to generate $95 million of savings by the fifth year.

Retain Other Units

Weston will retain its other North American bakery units, including Interbake Foods, a maker of biscuits, cookies and ice- cream cones. George Weston said it will use the cash from its divestitures “wisely and at the appropriate time.” Bimbo said last week that it was in talks with Weston.

Weston rose C$2.03, or 3.3 percent, to C$62.95 as of 12:39 p.m. in Toronto Stock Exchange trading. The shares gained 13 percent this year before today. Grupo Bimbo shares fell 2.1 percent to 59.78 pesos.

A group of banks including Citigroup Inc.’s Banamex unit, HSBC Holdings PLC and Banco Santander SA will finance the deal through a $600 million bridge loan, a three-year credit line of $900 million and a five-year credit of $800 million. When the deal is closed, the company’s debt will be 3.3 times larger than its earnings before interest, taxation, deprecation and amortization.

Standard & Poor’s placed all of Grupo Bimbo’s ratings on credit watch with negative implications last week. Grupo Bimbo Chief Executive Servitje will hold a press conference later today in Mexico City to discuss the deal.

Loblaw

The announcement that the two companies were in talks prompted speculation that Weston may use the cash from the sale to buy shares of its Loblaw Cos. grocery chain it doesn’t already own. Weston owns 62 percent of Toronto-based Loblaw.

The sale “could spark renewed discussion of Weston taking itself or Loblaw private,” David Hartley, an analyst with BMO Capital Markets, said today in a note to clients.

Weston decided to sell assets where it didn’t have a number one position in a market or had the potential to attain that spot amid concern over the deteriorating economy in the past year, Chairman W. Galen Weston said on a call with analysts.

The company hasn’t yet decided how it will use the approximately C$5 billion ($3.97 billion) in cash it will have after the deal closes, he said. Weston said he sees a “major consolidation play” in the frozen baked-goods business as well as opportunities in supermarkets.

“Over the next 18 months, economic uncertainty could lead to great buying opportunities,” Weston said. “Under such circumstances, cash will be more than king.”

Weston declined to comment on speculation that he will take Loblaw or George Weston private.

BirdGuano
12-10-2008, 03:06 PM
Ain't globalization great ?

A.T. Hagan
12-10-2008, 03:09 PM
Makes me glad that I make my own. No Bimbo bread for me, thanks.

.....Alan.

BirdGuano
12-10-2008, 03:12 PM
Makes me glad that I make my own. No Bimbo bread for me, thanks.

.....Alan.

What, no discount Chinese baking ingredients for you ?

:D

A.T. Hagan
12-10-2008, 03:33 PM
Heh. After the Chinese gluten scandal broke I immediately e-mailed the company that sells the gluten I use to ask where it came from. And my animal feed. And some flour. So, NO, no discount Chinese baking ingredeints for me! :lol:

.....Alan.