Grupo Bimbo acquires US subsidiary of Canada's George Weston for $2.4 billion

11 December 2008

Mexican bakery giant Grupo Bimbo SAB announced Wednesday it has signed an agreement to buy the US subsidiary of Canada's George Weston Ltd. for $2.4 billion, a deal that would make it one of the world's largest baked foods companies. Weston Foods Inc. makes breads and pastries under brands including Entenmann's, Freihofer's, Stroehmann and Thomas'. It has 22 plants and more than 4,000 distribution routes, concentrated largely on the east coast of the US.

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 per cent of Nutrella Alimentos SA, and CEO Daniel Servitje has said he aims to create the world's largest bread maker within two years. Bimbo currently has 80 plants, 800 distribution centers and 36,500 distribution routes in 18 countries.

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

Mexico accounted for 67 per cent of Grupo Bimbo's third- quarter sales of 19.03 billion pesos ($1.4 billion), and the US 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.

Sales may rise 35 percent to $10 billion, and US revenue may more than triple to $3.9 billion, Servitje said. The company does not plan any other acquisitions in the next two years, said CFO Guillermo Quiroz.

Six banks will finance $2.3 billion of the purchase price, with $600 million in a one-year bridge loan and further credits that would come due in three to five years. The deal has been approved by the boards of both companies, and is only awaiting approval by Bimbo shareholders and regulatory authorities. Bimbo expects the deal to be concluded by the first quarter of 2009.