Canada's iconic coffee chain isn't so small-town any more. Tim Hortons dropped a big deal Thursday, announcing the sale of its 50 per cent stake in Maidstone Bakeries for $475-million in cash.
The position was part of a joint venture with Swiss-owned Aryzta AG that started in 2001. Together, the two companies commissioned the construction of a 400,000 square foot bakery in Brantford, Ont., that makes the chain's donuts, Timbits, pastries and some breads. The facility's process is unique. After baking, these foods are flash frozen so that they can be re-heated by individual stores using their Always Fresh ovens.
Now Tims is cashing out. The company won't specify its exact accounting gain until the deal closes, but it has confirmed a net investment in Maidstone of $75-million, and it has sold the 50 per cent ownership for $475-million.
Why would Tim Hortons sell such a vital part of its business? Two reasons.
First, Aryzta has more to gain from owning the whole thing because it can open it up to other channels, such as grocery chains. Plus, it benefits from the Swiss tax structure.
Second, Tim Hortons gets a huge payout that it can use however it wants (but shareholders will probably want a portion). The company also secured its current pricing formulas and commitments until the end of 2016, with the option to extend to 2017, so it hasn't totally given up control of its product.
Tim Kiladze