CSM to Buy CGI Desserts for $70 Million

CGI is a leading innovative supplier of Thaw & Serve fully decorated cakes and upscale dessert cakes. The market size in In-store and Foodservice for this product segment is estimated to be approximately USD 1.5 billion.

27/07/06 CSM has reached a definitive agreement to acquire CGI Desserts, Inc. for USD 70 million cash (plus the assumption of USD 5 million debt), approximately 1 x sales. CGI is a leading innovative supplier of Thaw & Serve fully decorated cakes and upscale dessert cakes. The market size in In-store and Foodservice for this product segment is estimated to be approximately USD 1.5 billion and represents the largest and fastest growing segment in Instore bakeries with an average growth of 5-6% CAGR (Compound Annual Growth Rate). With the combination of CGI and H.C. Brill, CSM will be a market leader in the In-store channel.

CGI operates one production plant, based in Sugar Land (Houston), Texas, USA, and employs approximately 400 employees. CGI has a strong growth record of more than 10% CAGR in recent years. The existing management team will be staying with the company. Significant growth opportunities exist for CSM and CGI in this market segment, identified as one of the strategic growth areas for CSM. Beginning in 2004, CSM Bakery Supplies North America (BSNA) went through a reorganization and consolidation phase, which was executed successfully. A key initiative was the merger of H.C. Brill, Henry & Henry and Baker & Baker into one company: H.C. Brill. Since 2004, H.C. Brill’s faster growth and reduced supply chain costs have been a significant contributor to the overall improvement in growth and margins at BSNA as a whole.

CSM expects to close the transaction, which is subject to regulatory review, by 1 September 2006. Commenting on this transaction Gerard Hoetmer, CEO of CSM, said: “The acquisition of CGI is in line with our existing strategy of making bolt-on acquisitions where returns will exceed the cost of capital. Synergy benefits will be generated through procurement and production savings, while substantial sales growth opportunities will be attained both within the in-store and foodservice channels. The combination of CGI and H.C.Brill will enhance BSNA's position within the attractive and growing Thaw & Serve fully decorated cakes and upscale dessert cakes segment. With the acquisition of CGI, BSNA will strengthen its market position and ability to generate returns for shareholders, whilst the acquisition is consistent with CSM’s commitment to achieve 8-10% return on sales and a 11-13% return on capital by 2008 for Bakery Supplies.”

Last week it emerged that CSM would exit the sugar business by announcing plans to sell it to fellow Dutch sugar supplier Royal Cosun. The move is seen to be securing the continuity of the Dutch sugar sector in the rapidly changing European sugar market, also in the longer term, as the EU sugar reforms draw closer.