Milling & Baking News - August 1, 2017 - 11

Grupo Bimbo global growth seen
bolstering by East Balt acquisition
Continued from Page 1

Hut, YumChina, Subway and Nando's.
East Balt's annual sales have been
growing at a 3.6% compound rate over
the last five years while EBITDA has
been growing at a 7% rate.
For Grupo Bimbo, the transaction
will be accretive to margins, earnings
per share and profitability, Bimbo
said. East Balt will give Bimbo better
access to global markets "where bread
consumption through the Q.S.R. channel is high," the company said.
Acquired by One Equity Partners,
the private investment arm of JPMorgan Chase & Co., in 2012, the business
had been owned for decades before
that by the Kuchuris family.
In a July 26 conference call with investment analysts in connection with
second-quarter financial results (see
story on Page 20), Mr. Servitje offered
insights into what made East Balt an
attractive acquisition target for the
world's largest baking company. He
said East Balt's strong relationship
with leaders in the Q.S.R. industry
was of great value to Bimbo.
"East Balt Bakeries provides exactly
the kind of compelling opportunity
we are seeking in terms of complementing and growing our current
food service business and providing
further geographic expansion and diversification," he said. "The company
is one of the leading global food-service focused providers of baked goods
to quick-service restaurants in 11
countries around the world. East Balt
Bakeries enjoys decades long relationships with some of the world's leading
Q.S.R.s such as McDonald's, Wendy's,
Burger King and KFC, among others.
It operates 21 baking plants and employs about 2,200 associates."
He said the $650 million purchase
price Bimbo will pay equates to a 9.3
EBITDA multiple and that Bimbo has no
presence in most of the markets in which
East Balt operates around the world.
"While East Balt Bakeries has headquarters in Chicago, it is really an international player with a majority of its
facilities and revenues located outside
of the United States and in the largest
and the fastest growing Q.S.R. markets
in the world," Mr. Servitje said. "The
geographic footprints of the two companies intersect in only three markets:
the U.S., Morocco and China, where
our businesses are complementary
and offer potential for synergies, scale
bakingbusiness.com / world-grain.com

and growth. We also gained entry to
eight new countries through East Balt
namely France, Italy and Switzerland
in Western Europe; Ukraine and Russia
in Eastern Europe; Turkey and South
Africa in the Middle East and Africa;
and South Korea in Asia."
Bimbo already is a food service supplier in markets in which the company operates, Mr. Servitje said. He
described the Q.S.R. segment as especially attractive.
"The industry is in a sustained period of growth, driven by tailwinds in
out-of-home spending," he said. "This

Business

product innovation and high-speed
dough processing, offering Bimbo the
opportunity to deepen its best practices, Mr. Servitje said.
While Bimbo expects to generate
synergies from the East Balt acquisitions, significant structural differences
exist between the two businesses, Mr.
Servitje said. No specific financial figure was offered for annual savings to
be achieved through synergies.
"The distribution system of East
Balt is different from the ones that we
have on our system in other parts of
our network, and it will remain separate," he said. "It's mostly frozen distribution that goes through third parties and in some cases are their own
frozen solution network routes. So

Countries where Grupo Bimbo and East Balt operate

Grupo Bimbo
East Balt
Grupo Bimbo and East Balt
is even more pronounced in emerging
markets, while worldwide technology is enabling a more seamless food
service experience. As a whole, the
Q.S.R. industry is expected to grow at
a compounded rate of almost 6% per
year over the next five years. In the regions where East Balt is present, like
the Middle East and Africa, that rate
is actually expected to be upwards of
9%; in Asia, about 7%; and in Eastern
Europe, over 6%."
Also attractive to Bimbo were East
Balt's leadership.
"The top-notch management team
and a big bench of industry veterans
has delivered a consistently strong
track record of performance," he said.
The company's chief executive officer
is Mark Bendix. Before joining East
Balt in 2012, Mr. Bendix held leadership positions at The Bama Companies, Inc.; General Mills, Inc.; The Pillsbury Co.; and Quaker Oats.
East Balt has particular expertise in

The acquisition of East Balt Bakeries
will raise to 32 from 24 the number
of countries in which Grupo Bimbo
S.A.B. de C.V. operates.

we will maintain it, obviously, as it is.
And there are no synergies planned in
that regard."
East Balt's roots date to 1939 when
Louis Kuchuris acquired Mary Ann,
a bankrupt bakery on the northwest
side of Chicago that produced a line of
bread, rolls, buns and pastries. Under
the ownership of Mr. Kuchuris, Mary
Ann serviced restaurants, snack shops,
drive-ins, hotels, schools and caterers.
In 1955, an agreement between Ray
Kroc and Mr. Kuchuris led East Balt to
to begin supplying buns to Chicagoarea McDonald's restaurants owned
by the emerging fast food pioneer.
In 1969, Mr. Kuchuris built East
Balt Commissary, an automatic bun
bakery that exclusively serviced 40
McDonald's in the Chicago area. In
2015, East Balt acquired The Wendy's Co.'s Zanesville, Ohio-based
bakery business, known as The New
Bakery Co., L.L.C.
Mr. Bendix, c.e.o. of East Balt, said
Milling & Baking News XAugust 1, 2017 / 11

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Milling & Baking News - August 1, 2017

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