Mexican baker Grupo Bimbo is banking on last month's acquisition of a clutch of assets from Spanish bakery group Panrico to propel its growth in Europe over the next three years.
Last month, Bimbo acquired all of Panrico's Spanish and Portuguese assets except its branded bread business in an EUR190m (US$209m) acquisition. Panrico is owned by private-equity firm Oaktree Capital Management.
Speaking on a conference call yesterday to discuss Bimbo's half-year results, Bimbo CEO Daniel Servitje said the company should realise an annualised revenue increase of 70% in Europe as a result of the deal.
In the first six months of 2015, Bimbo saw its net sales in Europe increase 18%.
In Iberia, the bread category remained stable during the second quarter but Bimbo said it saw pressure in the cake category where there was increased promotional activity from competitors.
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"Panrico is one of leading baking companies in the Iberian Peninsula and generates around EUR280m in revenues per year in the sweet baked goods, buns and rolls categories. We will significantly strengthen our profile in the Iberian market in terms of the product portfolio, our distribution reach and our manufacturing facilities."
He added that there would be "substantial synergy opportunities" for the company to capture in the order of EUR40-50m in the next 30 months after completion. There would, however, be a one-time investment of EUR70m.
Servitje did not reveal the reason behind the investment as the deal is still in its approval stages but did suggest the company would continue to see "redundancies in the whole value chain" as it moves to "significantly improve" the performance of the region.
In recent months, Bimbo announced it was restructuring one of its own plants in Spain, a move that saw 42 jobs go. At the end of last year, Bimbo stopped producing bread at its Cantabria plant as it looks to modernise production to become more competitive.
Servitje said: "We think it [Panrico deal] is feasible – it won't be without a thorough plan to integrate both companies. I envision it will be a very good company now that we have both the bread and sweet baked goods side of that business combined and have very good synergies in the distribution part of our value chain. It is going to require a lot of detailed work but at the end of the day it will result in a very healthy business for the company."
Servitje said there was "a lot of work required" in Europe "to get us where we want to be". He added: "We hope to be in the high single in EBITDA margin in Europe after the [Panrico] integration."
The Bimbo chief did reveal the company is seeing the benefits of its acquisition last year of Canadian business Canada Bread in the UK. The deal gave Bimbo ownership of the New York Bakery Co. bagel brand.
