TORONTO (CP) — The head of food conglomerate George Weston Ltd. tried to reassure investors Thursday that the Canadian bakery and grocery giant is combing the investment landscape for ways to spend the billions of dollars of cash on its balance sheet.
At the company's annual meeting, president and chairman Galen Weston Sr. acknowledged that shareholders are "eagerly awaiting" an announcement of what the company plans to do with the more than $3 billion it got when it sold a couple of its businesses in the last two years.
"Let me reassure you that we have a strong team examining the North American landscape for investment opportunities that meet our strategic profile. While the returns on our cash investment have been low, it's been safe and the improvement in the value of the Canadian dollar substantial," Weston said.
The company sold its Neilson dairy business to cheese maker Saputo for $465 million in 2008 and its U.S. fresh-baked-goods division to Mexico Grupo Bimbo for US$2.5 billion in 2009. Since then it has looked at a number acquisitions but none have worked out, either because of the cost or a lack of a good fit.
However, chief financial officer Bob Vaux hinted that an acquisition could be close at hand in response to a shareholder question about the company's preferred shares.
The shares pay a dividend of 5.2 per cent a year, so on $800 million of preferred shares, George Weston is paying out more than $40 million a year, Vaux said. He admitted that the company is currently earning less on its excess cash than it's paying on the preferred shares, but said an acquisition would change that.
"If we worked on the assumption that we were not going to redeploy the funds in an acquisition, we would certainly retire the preferred shares, but these are very good preferred sharers, and if and when we do an acquisition we'd be very happy to have them in the capital structure and it would be very difficult to replace them if we took them out," Vaux said.
"So while it's having a short-term effect on the company, the board has concluded that until such time as we land on a redeployment it is appropriate to leave them in place."
For the first quarter of 2010, Weston reported a profit of $42-million or 25 cents per share. In the same period last year, Weston earned $863 million or $6.61 per share. This included $890 million from the sale of part of its U.S. fresh baking business.
Weston's revenue from continuing operations increased to $7.1 billion in the most recent quarter from $7 billion in the first quarter of 2009.
The company owns both a food processing business and a food distribution business which is operated through Loblaw Companies Ltd., a separate publicly traded company.
Shares in Weston added 80 cents to $73.64 in afternoon trading on the Toronto Stock Exchange.