Shareholders at IAWS vote in favour of merger with Swiss bakery group Hiestand

SHAREHOLDERS OF Irish food group Iaws yesterday voted in favour of a merger with Swiss bakery group Hiestand, writes Fiona Reddan.

The merger will create a new Swiss-headquartered company, Aryzta, which will have revenues of some €2.3 billion and 8,000 employees.

At the group's court meeting yesterday, 99.97 per cent of shareholders voted to accept the merger. Approval of 75 per cent was needed to secure the deal.

Iaws must await the outcome of the vote of Hiestand shareholders on August 19th to see if the merger goes ahead.

If Hiestand shareholders vote in favour of the deal, Iaws will hold 83.3 per cent of the Aryzta stock, Hiestand 8.7 per cent and Lion Capital 8 per cent.

However, a number of Hiestand shareholders led by fund manager Peter Lehner, who represents about 5 per cent of Hiestand's shares, are staging a legal challenge to the merger on the grounds that Lion Capital was offered a premium for its share of the Swiss company.

If less than two-thirds of Hiestand shareholders vote in favour of the merger, then, by Swiss law, Iaws must make a bid for the company. Such a bid would require approval by 90 per cent of Hiestand's shareholders.

Iaws owns more than one-third of the company, having acquired Lion Capital's 32 per cent share.

Of the premium offered to Lion Capital, Iaws chairman Denis Lucey said it took some level of enticement "to get the whole thing moving", and that, "relative to future opportunities, we think we got good value for money".

He added that the challenge ahead would be a "hill to climb", and maintained that the offer to Hiestand shareholders was "fair and reasonable".

Mr Lucey said the firm's renegotiation of its financing facilities was the "key to the door" of the merger, with funding of €1.1 billion in place from a host of banks, including Bank of Ireland and Ulster Bank.

As the merger was only costing the firm €30 million in cash plus associated fees, Aryzta would have a strong balance sheet.

Mr Lucey reiterated Aryzta's goal of doubling its earnings within five years.

Last week the Swiss takeover board approved the merger, and the Irish Stock Exchange (ISE) has approved the listing of Aryzta.

If the merger goes ahead, the new company, Aryzta, will list on the ISE and the Swiss SWX exchange on August 22nd at an estimated price of €30, double the current share price of Iaws.

The merger was first announced in June. It is the culmination of a partnership which began five years ago when Iaws acquired a 22 per cent stake in Hiestand, increasing this to 32 per cent in 2005.

Iaws closed down almost 4 per cent in Dublin yesterday, falling 56 cent to €14.96.