TORONTO — Just two years after selling off its U.S. fresh-food bakery business, George Weston Ltd. (TSX:WN) is sinking its teeth into American frozen cupcake, doughnut and cookie maker Keystone Bakery.
The Toronto-based food services giant, owner of the Loblaws grocery chain, said Monday the planned US$185-million transaction will be made through its subsidiary, Maplehurst Bakeries.
Under the deal, Weston will purchase three different operating companies in the United States, each subject to U.S. regulatory approval.
Keystone Bakery is comprised of Freed’s Bakery of Manchester, N.H., a baker of frozen, fully finished iced cupcakes.
It also owns Granny’s Kitchens of Frankfort, N.Y., a supplier of pre-fried and thaw-and-sell doughnuts, and Heartland Baking of DuQuoin, Ill., a specialty supplier of thaw-and-serve cookies.
“The combination of Keystone Bakery and Weston’s baking operations in the United States and Canada will allow us to better serve our customers in the North American sweet baked goods sector,” chief executive Galen Weston said in a statement.
Maplehurst is based in Brownsburg, Ind. and has plants in Indiana, Georgia, and Washington state producing everything from frozen cakes, doughnuts, rolls and bread to pies and danishes.
Monday’s announcement makes good on a company promise to shareholders in May to reinvest some of the more than $3 billion it got when it sold a couple of its businesses the previous two years.
The company sold its Neilson dairy business to Montreal cheese maker Saputo (TSX:SAP) for $465 million in 2008 and its U.S. fresh-baked-goods division to Mexico’s Grupo Bimbo for US$2.5 billion in 2009.
Since then it had looked at a number acquisitions but until now none have worked out, either because of the cost or a lack of a good fit.
Geoffrey Wilson, George Weston’s senior vice-president of financial services, said the purchase of another frozen food company was a strategic decision.
“We still have a number of businesses in the U.S., principally in the frozen and cookie side,” he said.
“What these acquisitions do is support and strategically grow the portion of the business that we retained in the U.S.”
Wilson said for now the company isn’t allowed to get back into the U.S. fresh bakery business because of restrictions tied to the sale to Groupo Bimbo.
However, he added that George Weston is still scouring the market for further acquisitions that would fit with its existing businesses.
“Food processing in North America is something that we have a strong management and expertise in, and so we continue to look at a lot of opportunities,” he said.
Weston is one of Canada’s major food companies. with operations in food distribution through its Loblaws unit (TSX:L), baking and other food processing. The company employed 143,500 people at the end of 2009 and generated more than $1 billion in net profits last year.
Shares of George Weston rose 47 cents to $83.25 in afternoon trading Monday on the Toronto Stock Exchange.