Maple Leaf Foods explores options to exit bakery business

Maple Leaf Foods is considering strategic alternatives for its bakery business, including a possible sale of its 90% stake in Canada Bread.

The move is part of the company’s strategy to focus on its meat business, and follows a review of opportunities to boost profitability across its global bakery business.

Canada Bread is a manufacturer and marketer of flour-based products, including bread, rolls, bagels and sweet goods, frozen partially baked or par-baked breads and bagels, and speciality pasta and sauces under the Dempster’s, Olafson’s, POM, Ben’s and Olivieri brands.

In 2012, it reported revenues of C$1.6bn.

The 90% stake in Canada Bread is worth C$1.5bn ($1.46bn), based on current trading prices, reported The Wall Street Journal.

Maple Leaf stated that there are significant growth opportunities in the baked goods sector that may be pursued, either as part of the company or under new ownership, adding that it believes either outcome would lead to a strong commitment to realise the full potential of the business.

Maple Leaf Foods president and CEO Michael H. McCain said, "We are confident that our bakery business can deliver significantly higher levels of profitable growth; the only question is how best to realise the future value of this business."

He said that the recently completed bakery strategy will require organisational focus and resources to implement.

"This process gives us the opportunity to determine the best path forward for Maple Leaf, our shareholders and our bakery business," McCain added.

The company has appointed a committee of independent directors to manage the process.

However, it cautioned that the process may not lead to any transaction and to date no decision to sell its interest in Canada Bread has been made.

Maple Leaf board chair David L. Emerson said, "The board and management are united in supporting this process, which will ensure we make the best decision for Maple Leaf while continuing to pursue the significant growth opportunities in our value-added, branded meat business."

If a deal is finalised, the company plans to use the proceeds to pay back its debt, reinvest in the business and return capital to shareholders.

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Image: The plans to sell the stake in Canada Bread is part of Maple Leaf’s strategy to focus on its meat business. Photo courtesy of David Arellano.