Baywa could be headed towards a restructuring phase.
Starting their journey with wealth that wasn't genuinely earned and couldn't be repaid, that's the brief narrative of Baywa's journey towards financial peril. Now, however, a recovery plan featuring strategic layoffs and asset sales is in motion. Hundreds of jobs are being slashed. Shares are up for grabs.
The initial moves towards potential financial rescue are underway at the financially strapped Munich conglomerate Baywa. The company has reached an agreement with primary lender banks and major shareholders regarding a recovery plan lasting till 2027, as per a stock exchange announcement. The recovery contract is expected to be legally binding by no later than the end of April 2025, including changes in financing.
Baywa, having roots in the co-operative movement, is Germany's top agricultural trader. The firm has a significant impact on agriculture and food supply in southern and eastern Germany. In addition, the century-old enterprise is active in the construction and energy sectors, providing services and trading.
An essential component of the recovery strategy involves the issuance of fresh shares. The anticipated capital increase, allowing for subscriptions by existing Baywa shareholders, is projected to fetch 150 million euros. The specifics will be finalized in the first quarter of the upcoming year.
The impending shrinkage of Baywa is also commencing: By March 31st, the company intends to sell its 47.6% stake in Raiffeisen Ware Austria (RWA) for 176 million euros, RWA's Austrian counterpart. So far, the companies have been intertwined in a complex web of cross-holding structures.
Eur 641 million in losses - accumulated so far
The Baywa stake in RWA is set to be restored to Austria and managed by a subsidiary of the RWA group's asset management. The relevant contract has been signed, but antitrust approval is still pending.
Back in early December, Baywa revealed major job cuts: Of the 8,000 full-time positions at Baywa AG's headquarters, 1,300 are set to be eliminated, equating to 16% of the company's full-time German workforce. Globally, Baywa boasts a workforce of more than 23,000 people in 60 countries. The international staff will also shrink due to the announced sale of business units.
Over the past few years, Baywa has expanded its renewable energy business and investments. The debts accrued from credit-financed expansion have become a significant burden for the company. By September of the next year, a syndicated loan with a potential value of up to 2 billion euros would have become due. Moreover, the substantial increase in interest rates since 2022 has led to a tripling of the annual interest repayments. In the first nine months of the present year, losses have already surpassed 641 million euros.
By no later than the end of April at the latest, new financing contracts for the period leading up to the hoped-for financial recovery in 2027 are to be negotiated. According to Baywa, "the majority of the around 300 financial creditors" are supporting the recovery efforts, as announced by the company.
The savings programme will be a crucial part of Baywa's recovery plan, as they aim to raise 150 million euros through the issuance of fresh shares in the first quarter of the upcoming year. The company is also in the process of selling its 47.6% stake in Raiffeisen Ware Austria (RWA) to help alleviate its financial struggles, with the aim of reducing its losses that have surpassed 641 million euros over the past few years.
