Cerealto Siro Foods, the Spain-based co-manufacturing and private-label business, has paused its production after potential investors walked away from a deal.
The move came after workers at most of its plants rejected the company’s “competitiveness plan”.
The group said in a statement sent to Just Food: “The situation of the company is very critical now and we will analyse with the financial entities [the] next steps to be made.”
It added: “The current situation means that we cannot legally continue to increase our level of debt with suppliers, so we have responsibly decided to temporarily stop production activity in the coming days and only manage the cash flow with the stock of finished product we have.”
The halt in production covers both the company’s domestic and foreign operations. Outside Spain, Cerealto Siro Foods is active in Portugal, Italy, the UK, the US and Mexico.
Its employees are continuing to go to work but only to deal with existing stock.
Last week, the biscuits and pasta maker announced plans to close a biscuit facility in Venta de Baños in Palencia province and relocate the 197-strong workforce to other group factories in Castilla y León as part of a competitiveness plan revealed in March with an aim to “reduce its excess fixed costs”.
Private-equity firms Davidson Kempner from the US and Turkey’s Afendis Capital Management teamed up to buy a majority stake in the business, which is reputed to have debts of EUR300m (US$321.5m). Their involvement was dependent on the competitiveness plan being implemented.
But Cerealto Siro Foods has announced workers at its plants – with the exception of the Aguilar de Campoo factory – have rejected the plan, leading to a re-think from the investors.
“The investor has communicated in writing that, given the lack of agreement with the workers to improve competitiveness, it is not in a position to proceed with the closing of the operation and, therefore, to undertake the investment under the terms of the agreement,” the company said.
“We have been working very hard during the last months to be able to answer the requirements and we have accomplished all requests of the due diligence. We have signed a global agreement with all financial stakeholders and the main shareholder and the anti-trust agency has approved the operation.
“The only request that has not been achieved is the approval of the competitiveness plan by the workers of the Spanish plants, with the exception of the Aguilar de Campo factory. As we shared since the beginning of the process, this request was necessary from all Spanish factories.
“The rejection of the competitiveness plan by part of the factories has been the key for the investors’ group to not materialise its investment in the company.”
Madrid-based Cerealto Siro Foods said it “deeply regrets the situation”.
It added: “We have been announcing the results of the rejection of the competitivness plan for the last months but regretfully part of the team members haven’t taken that into consideration.
“We found a good solution to revert the critical financial situation of the company with the investor group and capital to begin a new future but part of the team members didn’t want to accept that solution.”