Swiss group Hochdorf has entered a deal to sell its infant formula and dairy ingredients business to investor AS Equity Partners.
Hochdorf Swiss Nutrition (HSN) will continue to be led by CEO Ralph Siegl and the rest of the management team, with current employees retained post transaction, which is expected to close before the end of the year. Shareholder approval is required at a meeting to be held on 18 September.
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HSN, which is the manufacturing subsidiary of Hochdorf Holding, was effectively put on the market in April in the wake of a March announcement to review options for the struggling business.
The deal with AS Equity, which is headquartered in London with an office in Zurich, has been struck for an enterprise value of SFr83m ($97.7m). However, Hochdorf Holding will only receive SFr15.5m after a syndicated loan deduction of SFr67m. The investor will take on the debt obligation.
Within Hochdorf Holding sits the Hochdorf Group housing the infant nutrition and dairy food solutions units. In 2015, the pair of divisions were merged into HSN.
“In attempting to secure the operational business and to preserve relating jobs, and having carefully considered various alternatives, a sale of the subsidiary HSN proved to be the only viable option,” the Swiss group said in a statement.
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By GlobalData“Despite a promising realignment and a cash-positive business result in 2023 for the first time in a long time, there was no realistic possibility of overcoming the increasing financial burdens at Hochdorf Group level in the foreseeable future, even if the business remains competitive.”
A review of Hochdorf’s business strategy was launched in 2019 amid a series of profit warnings. Before the year was out, Hochdorf announced the disposal of its majority stake in the baby-food subsidiary Pharmalys, adding to its exit from cooking oils, flour, cereal, snacks, and fruit and vegetables.
Siegl added: “During the intensive exploratory talks, AS Equity Partners expressed great interest in HSN’s potential and acknowledged the strategic direction of our transformation process in recent years.
“HSN’s business activities, particularly in the area of infant nutrition with the Swissness quality feature, are to be further expanded and its reliable role in the Swiss dairy industry secured – with the goal of further improving the company’s profitability in a sustainable manner.”
According to the statement, Hochdorf Holding has applied for a “provisional debt restructuring moratorium and the appointment of an administrator, which has been granted by the competent court.”
At the September meeting, a renaming of Hochdorf Holding and a delisting of the company’s shares will be put forward to shareholders. HSN will not be affected by the debt restructuring process.
The group added that the proceeds paid to Hochdorf Holding from the HSN sale will not be enough to cover what it called “considerable legacy debt”, including a hybrid bond issued in 2017 valued at SFr125m.
Upon the agreement with AG Equity, Hochdorf Holding also “had to fully write off the inter-company loans granted to HSN years ago totalling SFr182m in the balance sheet as of 30 June 2024, resulting in over-indebtedness in the standalone financial statements of Hochdorf Holding”.
Andreas Schulte, the founder and managing partner of AS Equity, said: “The technological expertise of Hochdorf Swiss Nutrition, its relevance in modern nutrition and the encouraging trend in operational recovery are a compelling basis for us to tap into this interesting international potential.
“We look forward to continuing the company’s 129-year tradition with our investment.”
Hochdorf Group also brought forward its first-half results announcement due to the deal, with total sales revenue down 5.5% at SFr145.7m.
Infant nutrition sales dropped 23.2% to SFr38.9m, while revenue for ingredients increased 3.3% to SFr196.8m.
EBITDA dipped to SFr6.1m from SFr6.7m.
However, the group booked a bottom-line loss due to an impairment.
“With the agreed sale of HSN, this subsidiary is recognised at liquidation values in the Hochdorf Group’s half-year financial statements. Due to the legacy financial burdens, this led to an impairment of SFr141.3m, compared to book values. As a result, Hochdorf Group reported an accounting net loss of SFr141.5m,” according to a separate results statement.
