Bakery deal makes Galen Weston the king of cakes

For all his glitz, Mr. Weston gets full marks for the very earthy tasks of cutting deals and building strong management teams.

The Globe and Mail
February 20, 2001

Bakery deal makes Galen Weston the king of cakes
Andrew Willis

It's so easy to look past the success of George Weston Ltd. to the glamour of its founding family. So easy, and so wrong.

The Weston standard bearer is Galen Weston, impossibly handsome, polo pal of various princes and married to Hilary Weston, couture-clad representative of the Queen for those of us who reside in Upper Canada.

For all his glitz, Mr. Weston gets full marks for the very earthy tasks of cutting deals and building strong management teams.

Yesterday, George Weston outbid at least two major consumer goods rivals — Sara Lee and the unfortunately named Grupo Bimbo — to gain control of Unilever Group's baking division, Bestfoods.

For $2.7-billion in cash, Mr. Weston becomes the king of cakes in this part of the world. Morgan Stanley advised on how to take this throne.

Anyone doubt Mr. Weston can make this business go? In the past five years, George Weston has gone from being a $13 stock to a $77 stock. Outside of one or two high-tech skyrockets, you'd be hard-pressed to match this performance, and George Weston was recently bumping along 52-week highs.

This conglomerate makes money in the lowest-margin, toughest businesses in the land — one of its primary holdings is Loblaw Cos. Ltd. Grocery stores operate on razor-thin profits and chains have been at war with one another for decades. Loblaw has come from behind in this battle to become the market leader, vanquishing numerous rivals.

You don't win on good looks. You win by hiring extremely capable university friends such as Richard Currie to help run your companies, and backing their every bet.

And you win by buying and selling companies from a position of strength. A few years back, George Weston exited a historic holding in forest products — it owned E.B. Eddy. The sector tanked, and has yet to return to health. Meanwhile George Weston put the money to work at Loblaw, where multibillion-dollar acquisitions in Quebec helped take the grocery chain's stock from $8 to $48 in five years.

Now George Weston is taking on bank debt to fund the Bestfoods purchase, a move that threatens to undermine a pristine balance sheet. Have no fear. By the time the Unilever purchase closes, George Weston expects to be flush with cash generated from selling its fish processing and dairy divisions — someone tell Saputo that the Neilsen milk brands are up for grabs.

In addition, George Weston will raise money by selling 5 per cent of its interest in Loblaw to investors who just can't get enough of President's Choice. By moving from a 63-per-cent to 58-per-cent stake, Mr. Weston does nothing to diminish his control of Loblaw, and he may see the stock pop on the extra liquidity that's going to be available.

Canada has very few international jet-setters, and even fewer world-scale companies. With the Bestbuys acquisition, one of our corporate celebrities has put George Weston in position to play a dominant North American role in its sector.


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