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IAWS merger with Hiestand creates world leader Aryzta back
The merger of IAWS plc with Swiss firm Hiestand Holdings has created the Irish/Swiss listed group Aryzta, which is now one of the largest players in the international baked goods market. The deal, which took place prior to the landmark Lehman Brothers bankruptcy in September 2008, shows the ability of Irish advisers to conduct multi-jurisdictional transactions. The merger was achieved on a largely non-cash basis rather than a debt-funded transaction and has left the merged entity well placed to emerge stronger on the other side. For these and other reasons, the deal wins this year’s Corporate Finance Deal of the Year
The €2.5 billion merger of IAWS plc with Hiestand Holdings to create the Irish/Swiss listed group Aryzta AG, one of the largest providers of baked goods in the world, has secured the top spot in the Corporate Finance Deal category. Several ingredients in the deal ensured its position, including the cross-border nature of the transaction, the unusual transaction structure and the implementation of a scheme of arrangement.

Davy Corporate Finance was sponsor and adviser to IAWS, Arthur Cox was adviser to Lion Capital, the private equity firm involved in the deal, Ulster Bank was joint mandated lead arranger and Matheson Ormsby Prentice was lead adviser to IAWS.
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Following the acquisition of Lion Capital’s holding of 32 per cent in Hiestand by IAWS (resulting in IAWS holding 64 percent of the voting shares in Hiestand on completion of that acquisition), IAWS announced the proposed merger of IAWS with Hiestand. This merger was effected by the newly formed Aryzta acquiring IAWS pursuant to a scheme of arrangement under section 201 of the Irish Companies Act 1963 and, simultaneously with and conditionally upon the completion of the scheme, Aryzta absorbing Hiestand by means of a statutory merger under Swiss law. On completion of the scheme and merger, Aryzta became the holding company of the enlarged group and sought a listing in both Switzerland and Dublin. The previous IAWS shareholders and Hiestand shareholders held approximately 91.3 percent and 8.7 percent of Aryzta, respectively, on completion.

‘The transaction structure allowed IAWS to distinguish between the significant shareholding held by the PE firm and the rest of the shareholders, in effect a two-tier pricing structure,’ says Ivan Murphy at Davy Corporate Finance. ‘This would be difficult to achieve in a traditional offer in Ireland or the UK, but was permissible under Swiss rules. Execution risk was minimised by virtue of the long-standing relationship between the two companies and there was an excellent geographic fit between the two. Hiestand shareholders benefited from receiving an attractive cash offer in a situation where they had limited liquidity in Hiestand shares.’
Ivan Murphy

According to Christopher McLaughlin, partner at Arthur Cox, ‘the deal was complex and took considerable time to complete because it required tying in the timetable for the scheme and the Swiss merger. This was made potentially more complex owing to the fact that the scheme is a court controlled process and the necessary applications had to be made to the Irish court to approve the scheme and related reduction of share capital during the court’s summer vacation. In addition, the deal required the production of a prospectus approved by the Financial Regulator and related timing considerations.’
Chris McLaughlin

‘The transaction was structurally complex and ground breaking, involving both an Irish scheme of arrangement and a Swiss statutory merger, together with a dual listing on the SWX Swiss and Irish Stock Exchanges’, says Tim Scanlon at Matheson Ormsby Prentice.

The fact that the deal was completed in June 2008 was, with the benefit of hindsight, fortunate for all concerned. ‘The deal was completed just as the global credit crunch was beginning to gather steam but crucially, prior to the landmark Lehman Brothers bankruptcy in September 2008,’ says Jason Campbell, Associate Director, Corporate Banking at Ulster Bank.

In addition, the fact that the deal was achieved on a largely non-cash basis, ‘was a significant achievement and maintained the financial stability of the enlarged group post merger,’ says Campbell at Ulster Bank. ‘Adopting this sensible approach to the transaction, rather than a debt-funded transaction, has left Aryzta well placed to weather the current economic storm and emerge stronger on the other side.’

As regards obstacles to the deal, Murphy at Davy Corporate Finance, says: ‘the normal issues of competition clearances in different jurisdictions were overcome in the expected timescales. An appraisal rights action was threatened by certain minority shareholders of Hiestand, but this did not delay the process. The Swiss/Irish cultural differences also made for some interesting discussions!’

The Heineken/Carlsberg-led consortium’s �7.6 billion acquisition of Scottish & Newcastle plc was a close contender in the Corporate Finance Deal of the Year, however it was not chosen as the winning deal as the Irish element in the transaction was less significant than the IAWS deal.
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