Cuisine de France is a leading foodservice company that manufactures and supplies baked goods under its own brand name to retail outlets in Ireland, the United Kingdom and the United States. IAWS is a $1 billion (U.S.) in sales Irish company, which trades publicly on the London and Irish Stock Exchanges.
The joint venture, which is owned and controlled on a fifty-fifty basis by Tim Hortons and IAWS, includes plans to build a state-of-the-art bakery facility in southwestern Ontario. The facility will produce and distribute high-quality, par-baked goods to the Tim Hortons restaurant chain in North America, and to Cuisine de France outlets in the United States, using the European baking expertise and experience of Cuisine de France.
The facility will enable Tim Hortons to introduce, beginning in the fall of 2002, a variety of freshly baked baguettes to enhance its growing lunch program. The facility will also produce specialty breads and other confectionery items for the Tim Hortons restaurant chain.
Tim Hortons' restaurant staff will complete the baking process for the various items. The new technology will produce fresh products more often during the day and ultimately reduce the complexity of labor and operating costs.
Jack Schuessler, chief executive officer and president of Wendy's International, Inc., said: "This is an excellent growth opportunity for our Company that is consistent with our strategic direction to make investments that have superior returns and relatively low risk. IAWS and Cuisine de France are outstanding partners with core values that are similar to ours. We are focused on premier consumer brands that provide consistent, high quality food to customers in fast-growing sectors of the economy.''
Initial joint venture and start-up investment more than $70 million
The initial investment and start-up costs for the facility during 2001 and 2002 are expected to total in the $70 million to $75 million range (U.S. dollars), split between Wendy's and IAWS. As additional baking capacity is needed and more production lines are added, the total joint venture investment could reach the $210 million to $225 million range (U.S. dollars), split between Wendy's and IAWS.
Wendy's expects the venture to enhance its earnings beginning in 2003. The venture is also expected to generate positive operating cash flow and return on capital that is superior to the Company's 11.9% ROIC reported for the year 2000. While there will be investment spending for Wendy's in 2001 and 2002, the Company expects the impact to be no more than $0.01 per share in each year.
Philip Lynch, chief executive and managing director of IAWS, said: "The joint venture is an exciting step forward for our company. Over the past 18 months we have been working on establishing additional opportunities for our business in North America. This joint venture agreement with Tim Hortons is our first major investment in North America and gives the joint venture company the opportunity to supply Tim Hortons stores with bread using the Cuisine de France recipes and state-of-the-art production.
"Cuisine de France has brought a totally new approach to the baking industry, which meets in a very focused way the needs of both retailers and consumers. In a short space of time, Cuisine de France has established itself as the leading brand in the food sector in Ireland and the U.K., and has demonstrated the potential for the brand further afield. This venture with Tim Hortons will provide a manufacturing base which will allow us to unlock the potential of Cuisine de France.''
Cuisine de France, acclaimed for its technology and expertise in manufacturing par-baked products, is best known for its signature baguettes. The company currently supplies more than 300 distinctive and high quality breads, confectionery and savory products to more than 5,000 retail accounts in Ireland and the U.K. Retail customers include supermarket and convenience stores, including chains such as Spar, Stat Oil, Tesco and Londis.
Prospects for continued growth through these outlets are good for Cuisine de France's existing product range and through the introduction of innovative new products, said Ronan McNamee, managing director and co-founder of Cuisine de France.
Cuisine de France expanded into the U.S. in 1999 and currently supplies a variety of par-baked goods to its U.S. retail accounts.
"The new facility will provide a base in North America which could enable Cuisine de France and Tim Hortons to supply products to additional U.S. retail customers,'' McNamee added. "The opportunities with this venture are very exciting.''
As a matter of Irish law and the terms of the agreements, the companies' obligations are contingent upon a clearance being obtained from the Irish Minister for Enterprise, Trade and Employment under mergers legislation in Ireland.
Tim Hortons is testing par-baked products from Cuisine de France in its Columbus, Ohio, market. The products include freshly baked baguettes, in four sizes, plus breads in a variety of flavors and styles such as sun dried tomato, sour dough and multi grain. The baguettes are in addition to Tim Hortons' regular sandwich buns, and are expected to add another dimension of appeal for the robust lunch business gaining momentum for the chain.
Paul D. House, president and chief operating officer of Tim Hortons, said: "We've had great success with quality par-baked products. For example, we've been selling par-baked bagels for five years and consumers love them. The quality and variety is outstanding and we can constantly produce fresh bagels for our customers. One out of every two bagels sold in the Canadian foodservice industry is purchased at Tim Hortons.
"We believe the introduction of baguettes into our lunch program will have a similar level of acceptance from our consumers,'' House said. "The addition of fresh-baked breads moves Tim Hortons into a new growth category. Our numerous locations and drive-through operations will make it convenient for customers to pick up a loaf of high quality bread on their way home.
Wendy's management plans to host a conference call and simultaneous Internet web cast on March 6 beginning at 4:00 p.m. (EST, USA) to discuss the joint venture.
The dial-in number for the conference call is 712-271-3623 (passcode is Wendy's). Instant replay will be available through Friday, March 9. The number for instant replay is 402-998-1710. The Internet web cast is available at www.wendys.com . To listen to the web cast, go to the corporate web site, select investor information and web cast.
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