Hot chocolate

12 December 2012 By Quentin Webb

Barry Callebaut is splurging nearly $1 bln in Asia, and enduring credit downgrades to “junk”. And all that for a business that’s having a horrid year. But there are real savings and strategic logic. For bold M&A, having patient family backers and a non-euro zone base must help.

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Switzerland’s Barry Callebaut said on Dec. 12 it would buy the cocoa ingredients business of Singapore-listed Petra Foods for $950 million in cash to become the world’s largest cocoa processor. Barry Callebaut will initially fund the deal with a bridge loan, which it plans to refinance within a year by selling new debt and equity. It expects the acquisition to close in summer 2013.
Within four years the deal should generate 30-35 million Swiss francs of annual synergies through an “enhanced purchasing platform, optimised product flows and overhead costs”, the company said. Barry Callebaut will incur 10-15 million francs of one-off costs to achieve these synergies, and will spend about 10 million francs on transaction fees.
The takeover will increase Barry Callebaut’s sales in emerging markets by 65 percent, and give it an entry into the cocoa-powder business. In an interview with Reuters, Chief Executive Juergen Steinemann said he expects strong growth in this market segment, helped by demand from the biscuit, vending and drinks industries, with volumes likely to grow 5-9 percent annually in the Asia Pacific region over the next 5-10 years.
Shares in Barry Callebaut stood 2.23 percent lower by 1530 GMT at 920 Swiss francs. Petra Foods stock rose 20.4 percent to S$3.31.

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