- Valora is to acquire the German-based food service company BackWerk for approximately EUR 190 million. The company operates a franchise network of over 340 outlets in attractive locations mainly in Germany, Austria and the Netherlands.
- As a result of this acquisition, Valora will become one of Germany's leading vertically integrated food service providers and enhances its international profile.
- Furthermore, the transaction will enable Valora to unlock new growth potential in its core markets through attractive sales and margin synergies.
- Valora is also expanding its pretzel production capacity in Germany and the US with an investment of approximately EUR 50 million over the next two years.
- These investments will be financed by a combination of debt and equity. Valora is going to call an extraordinary general meeting in November 2017 to request a capital increase of around CHF 150 million, some of which will be used to refinance the hybrid bond, due 2018.
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The Swiss-based Valora Group has re-centered on its core business in recent years and is now a leading company in small-outlet retail units at heavily frequented locations in German-speaking Europe. It also has an integrated value chain from production to sales for pretzel and bakery products. Having completed its consolidation and business focus strategy, Valora is, as previously indicated, now investing in its growth strategy.
Valora to become a leading vertically integrated food service provider in Germany
Subject to the approval of the German Federal Cartel Office (Bundeskartellamt), Valora will purchase the food service company BackWerk from the Swedish financial investor EQT in Q4 2017 via an exclusive sales process. The purchase price for the acquisition is around EUR 190 million. The BackWerk management team will stay on board to ensure the company's continuity. BackWerk will still be managed from its head office in Essen, where it will operate as part of Valora's Food Service Division.
With BackWerk, Valora adds a strong and established brand to its format portfolio. BackWerk has over 300 outlets in Germany, which are mainly operated through the franchising model. This transaction will enable Valora to significantly expand its presence in the German out-of-home market. Together with its other current formats in Germany – Ditsch, ServiceStore DB, Press & Books, cigo, k kiosk, avec and U-Store – this amounts to over 1 500 sales outlets, mostly at heavily frequented locations. In addition to some locations in Switzerland and Slovenia, BackWerk also has 20 locations in Austria, where Valora is already present through Brezelkönig International and Press & Books, and 13 in the Netherlands, thus adding to Valora's growing international presence.
New growth potential in core markets through attractive sales and margin synergies
BackWerk has external sales worth over EUR 200 million and has expanded the number of its outlets by 25% in the past five years. In 2017, BackWerk anticipates net turnover in the region of EUR 55 million with an operating EBITA margin of around 26%. Based on the 2017 figures, Valora will pay an EBITA multiple excluding synergies of about 13x for BackWerk.
Moreover, Valora anticipates sales and margin synergies in the single-digit millions on a yearly basis over the medium term. Valora stands to benefit from BackWerk's franchising expertise and will strengthen the company's vertical integration through its investment in bakery products.
Additional capacity expansion for pretzel production
The company will make a further investment in future growth through the production operations of the pretzel bakers Ditsch. The company will invest approximately EUR 50 million in total over the next two years in expanding its capacity at the current production sites in Germany and the US. The US operation stems from the company's acquisition of Pretzel Baron in Cincinnati, US, in January 2017. These investments are a response to the growing pretzel market and they consolidate Valora's leading position in this area.
Michael Mueller, CEO of Valora, says: “We have created an excellent basis for growth in recent years with our focus on becoming a clearly positioned convenience and food service provider. The acquisition of BackWerk and the investment in our production facilities are an important step in continuing with the expansion of our Food Service business and the vertical integration of our production and retail operations.”
Karl Brauckmann, CEO of BackWerk, explains: “Valora is the ideal partner for us to maintain our strong growth of the past few years. We are pleased that we can, from now, be part of this dynamic and innovative company and thus make a significant contribution to Valora's continued growth.”
Confirmation of EBIT guidance and application for a capital increase
Valora confirms its previously disclosed EBIT guidance for 2017 as CHF 76 – 82 million. The anticipated EBIT contribution of BackWerk in 2017 will thus be more than offset through transaction costs. These growth-oriented investments will be financed by a combination of debt and equity. Valora is going to call an extraordinary general meeting in November 2017 to request a capital increase of around CHF 150 million, some of which will be used to refinance the existing hybrid bond, due 2018. Shareholders will receive an invitation to the extraordinary general meeting in due course.