Tim Hortons has signed an all-cash deal to sell its stake in the Ontario bakery business that feeds its restaurants doughnuts and Timbits.
The Oakville, Ont.-based restaurant chain on Thursday said it would sell its 50 per cent interest in Maidstone Bakeries of Brantford, Ont. to its joint venture partner, Swiss agrifood firm Aryzta AG, for $475 million.
The deal includes an agreement for Maidstone to keep supplying the Tim’s chain with baked goods until early 2016, with an option for doughnuts and Timbits through late 2017.
That supply deal then “may be extended beyond this point by mutual agreement,” Aryzta said in its release.
“In addition, we have flexibility to secure alternative means of supply after the supply agreement expires if necessary,” Tim’s CEO Don Schroeder said in his company’s release.
Aryzta, through its subsidiary IAWS Group, and Tim’s built the 400,000-square foot Brantford facility in 2002-03.
According to Tim’s public affairs manager Alexandra Cygal, the Brantford plant serves all the chain’s 2,800-plus stores across Canada, plus over 500 in the U.S.
“This investment helped transform the Tim Hortons business as their restaurants were enabled to produce freshly baked goods across all parts of the day under their ‘always fresh’ bakery concept,” Aryzta noted.
The deal is expected to close by the end of this year, after which Aryzta said it would “fully consolidate” Maidstone into its own operations.
The deal puts Aryzta “in a position to fast track growth from its manufacturing capability in North America by leveraging Maidstone’s experienced labour force and intellectual property embedded in its design and operations, to serve the dynamic QSR (quick-serve restaurant) segment,” the company said.
That means Aryzta will be able to market any spare capacity at the Brantford plant to its other customers — such as those it gained earlier this year when it bought California-based Fresh Start Bakeries, a multinational firm best known as a supplier of burger buns to McDonald’s.
In that sense, Aryzta said, the Maidstone deal will translate to increased use of the parent company’s baking capacity, which in turn is expected to “unlock value” totalling C$548 million for Aryzta once the deal is complete.
“Due to Aryzta’s ability to potentially leverage available surplus capacity for other channels and the international nature of their tax structure, this facility represents greater economic value to Aryzta than to Tim Hortons,” Tim’s said in its release.
Tim’s hasn’t yet said what it plans to do with the net proceeds from the sale, other than to say it’s considering “possible options” including “potential avenues to return value to shareholders.”