Fitch: Bimbo's Acquisition of Panrico Manageable for its Credit Quality
Fitch views this acquisition as positive to Bimbo's operations as it will strengthen its business position in those countries and should provide synergies with complementary manufacturing plants, distribution networks and product portfolio. In addition, Fitch does not foresee a material change in our previous estimation of Bimbo's total debt-to-EBITDA trending below 3.0x in the next 12 to 18 months.
Panrico is one of the leading producers in the baking industry in Spain and Portugal participating in the categories of packaged bread, sweet baked goods and buns and rolls. The acquisition includes known brands such as Donuts, Qe!, Bollycao, La Bella Easo, and Donettes, among others, and excludes its brands in the packaged bread category. The company operates nine production facilities and has more than 2,000 employees. The acquisition is subject to customary regulatory approvals and is expected to close in the fourth quarter of 2015.
Bimbo's ratings reflect its important size and scale within the global bakery industry, its strong brand recognition and positioning in the markets where it operates, and its extensive distribution network which provides a key competitive advantage. The ratings also consider the company's stable operations with historically low volatility in revenues and margins, diversified revenue base and positive free cash flow (FCF) generation. Bimbo's ratings are constrained by higher debt levels associated with its acquisition strategy, exposure to raw material prices and foreign exchange volatility of its USD-denominated costs, and changes in tax laws associated to a further increase in taxes on high-calorie food products in Mexico.
Fitch currently rates Bimbo as follows:
--Long-term Issuer Default Rating (IDR) at 'BBB';
--Local currency long-term IDR at 'BBB';
--National long-term rating at 'AA+(mex)';
--USD800 million senior notes due 2020 at 'BBB';
--USD800 million senior notes due 2022 at 'BBB';
--USD800 million senior notes due 2024 at 'BBB';
--USD500 million senior notes due 2044 at 'BBB';
--Local Certificados Bursatiles Issuances at 'AA+(mex)'.
The Rating Outlook is Stable.
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