CSM's $70 million acquisition of CGI Desserts, a supplier of thaw and serve bakery products, underlines again the firm's focus on the bakery market.
Indeed, CSM believes that significant growth opportunities exist in this particular market segment, which has been identified as one of the firm's strategic growth areas.
The market size in in-store and foodservice for this product segment is estimated to be approximately $1.5 billion, and represents the largest and fastest growing segment in instore bakeries with an average growth of five to six per cent CAGR (Compound Annual Growth Rate).
CSM believes it can become a market leader in the in-store channel, and expects to close the transaction, which is subject to regulatory review, by 1 September 2006.
The acquisition can be seen as part of the Dutch ingredients producer's overall effort to streamline its bakery portfolio and strengthen growth in pivotal areas. The group recently sold its lucrative sugar business to Royal Cosun, which will be handed over in the fourth quarter of 2006 for a provisional price of 202m.
The announcement of the sale, which was made earlier this month, follows CSM's February announcement that it was looking to jettison its sugar business in order to sharpen business focus and strengthen its position in the bakery ingredients and products arena as well as the lactic acid and lactic acid derivatives sectors.
CSM Sugar has an annual turnover of around 250m and produces and sells 350,000 to 380,000 tons of sugar each year. Sale of the division comes in the wake of a year of restructuring for CSM, which has an annual turnover of around 2.6bn and a workforce of 8,500.
CSM Bakery Supplies North America (BSNA), which began in 2004, has been at the forefront of these changes. A key initiative was the recent merger of H.C. Brill, Henry & Henry and Baker & Baker into one company: H.C. Brill.
The group said that H.C. Brills growth and reduced supply chain costs have been a significant contributor to the overall improvement in growth and margins at BSNA as a whole.
"The acquisition of CGI is in line with our existing strategy of making bolt-on acquisitions where returns will exceed the cost of capital, " said CSM chief executive Gerard Hoetmer.
"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. With the acquisition of CGI, BSNA will strengthen its market position and ability to generate returns for shareholders, whilst the acquisition is consistent with CSMs commitment to achieve eight to ten per cent return on sales and a 11 to 13 per cent return on capital by 2008 for bakery supplies."
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 per cent CAGR in recent years.
The existing management team will be staying with the company.