FOOD GROUP IAWS plans to double its earnings following its merger with Swiss bakery group, Hiestand.

The merger, which will lead to the creation of a new firm, Aryzta, will have revenues of some €2.3 billion, more than 8,000 employees, 23 manufacturing plants and 111 distribution centres serving 200,000 customers on four continents. Management is aiming to double Aryzta's earning base over the next five years.

The creation of Aryzta represents the culmination of a partnership which started five years ago when IAWS acquired a 22 per cent stake in Hiestand, increasing it in 2005 to 32 per cent.

Yesterday, IAWS announced that it had acquired an additional 32 per cent from private equity firm Lion Capital for 12.7 million IAWS shares plus €30 million in cash, which as of June 6th valued the transaction at about €230 million. Lion Capital acquired its 32 per cent share in Hiestand in February 2008 for an undisclosed sum.

"The beauty of the merger is that the companies are very complementary to each other," said IAWS chief executive Owen Killian, who will retain this role in Aryzta. "The proposed transaction will create a global food business focused on niche segments of the value-added bakery and convenience food market."

IAWS shareholders will now exchange their shares for shares in Aryzta at a rate of two IAWS shares for each Aryzta share, while the ratio for Hiestand shareholders is 36 Aryzta shares for every one Hiestand share. The shareholding in the new firm will be as follows: IAWS (83.3 per cent), Hiestand (8.7 per cent) and Lion Capital (8 per cent).

The new firm will be incorporated in Switzerland because, under Swiss law, a Swiss public company cannot be merged with an Irish one. The company will also be tax resident in Switzerland and will therefore pay corporation tax at a rate of 35 per cent. However, Mr Killian said the firm will pay tax where it makes its profits.

Aryzta, whose name is derived from the Latin noun, Arista, meaning the pinnacle or apex of a single ear of wheat, will be led in large part by IAWS staff. Mr Killian will become chief executive of the new group, while chief operating officer Hugo Kane and chief financial officer Patrick McEniff will also retain their titles. Urs Jordi will remain as chief executive of Hiestand International.

The firm will be chaired by the current IAWS chairman Denis Lucey, with Wolfgang Werlé, chairman of Hiestand, acting as deputy. The directors of IAWS and Hiestand will join the board of Aryzta, along with Lyndon Lea, founding partner of Lion Capital.

The company is expected to list in mid-August on both the Irish Stock Exchange and the SWX Swiss exchange, and will become one of the ISEQ's 10 most valuable companies. Aryzta will not list on the London Stock Exchange.

Shareholder approval is needed on both the share exchange (approval by 75 per cent of IAWS shareholders needed) and the merger (approval needed by two-thirds of Hiestand shareholders).

The merger is expected to be completed in the third quarter of this year.