Aryzta North America’s sale continues what has been an active period for the bakery operator. Its recent history has been a rollercoaster complete with rumors about a potential takeover, a high debt level, falling sales and leadership changes at its parent company. Switzerland- and Ireland-based Aryzta AG’s overall business has been struggling. According to the company’s 2020 annual report, its North American business unit represented 43% of the company’s overall revenue, but the amount it generated had declined every year since 2016, partly owing to discontinued operations.
Aryzta’s latest divestiture is another step by the company to turn its business around and tighten up its operations. In December 2020, Aryzta North America sold its take-and-bake pizza operation to PE firm Brynwood Partners. Two years earlier, Hostess Brands purchased its Big Texas and Cloverhill brands.
Lindsay Goldberg maintains a diverse portfolio of companies but this isn’t its first foray into the baked good segment. In fact, Lindsay Goldberg and Aryzta are already familiar with each other. In 2010, Lindsay Goldberg sold specialty bakery products maker Fresh Start Bakeries to Aryzta AG for $900 million. Fresh Start Bakeries was affiliated with investment funds that Lindsay Goldberg managed. The company, which supplies bakery products to QSR, foodservice and retail customers, was included with this most recent transaction.
Under Lindsay Goldberg’s leadership, Aryzta’s North American business may have an opportunity to turn things around. While the first part of Aryzta’s plan announced in December 2020 involves disposing of businesses to reduce its debt, the second part focuses on improving the health of its remaining operations.
Food and beverage plays provide PE firms with a relatively safe bet because the industry is somewhat insulated from slumps in the economy. The pandemic has caused supermarket sales to surge as consumers stock up, eat more at home and look to pass the time with new foods and culinary indulgences. One challenge for food brands, however, is shopper demand for better-for-you-offerings and the use of recognizable, natural ingredients — a shift more manufacturers have been incorporating into their products.
Consumers also are showing an increasing appetite for sweets during the pandemic, which could give Aryzta the foothold it needs to get back in the game. They’re also growing tired of cooking at home, which makes ready-to-eat options more appealing.
This would not be the first time that a bakery business pulled off a successful turnaround. After Hostess emerged from bankruptcy in 2013, it flourished under its new PE-led ownership by focusing on building out production capacity and expanding its snacking platform. It also acquired companies that filled in some of the segments it lacked at the time, such as breakfast.