Maple Leaf Foods considers selling its bakery business by early 2014
October 22, 2013 by David Friend The Canadian Press
Maple Leaf Foods is considering selling its bakery business in an effort to get the most out of its operations, and that could include the sale of its 90 per cent interest in Canada Bread.
Chief executive Michael McCain said Monday that while the company hasn’t decided the fate of the bread assets, a sale is on the short list of possibilities.
“We started a process to consider alternatives,” he said in an interview.
If a deal materializes, popular brands like Dempster’s, Tenderflake and Olivieri pastas would find themselves in the hands of a new owner.
Maple Leaf has been scouring its operations for cost savings as part of a seven-year restructuring plan that would improve the profits of the overall business, which is primarily focused on meat products.
“The bakery business performance has plateaued at a high level, but plateaued over the course of the last few years,” McCain said.
A decision to court potential buyers comes after Maple Leaf found that revamping its bread operations over the next five years would involve further cost cutting and expansion plans that “require resources, focus and management time and effort,” McCain said.
That effort comes with “some measure of risk” for the company, he added.
Before Maple Leaf decides its next steps, the company plans to see who else might want to take on the responsibility.
Meanwhile, shareholders appeared optimistic that a deal would be carved out, with Maple Leaf stock up $1.33, or 10 per cent, at $14.63 Monday afternoon.
This year, the company’s stock has risen about 22 per cent on rumours that outsiders could acquire pieces or even the entire company.
Canada Bread shares gained six per cent, or $3.90, to trade at $65.15. Based on recent stock market prices, Canada Bread had a value of about $1.6 billion prior to the announcement Monday, accounting for more than half of Maple Leaf’s overall worth.
The fate of the company is expected to be decided in early 2014, subject to approvals.
Maple Leaf has set up a special committee of directors to ensure that all shareholders are treated fairly, but does not guarantee a transaction will be completed.