Simplify Aryzta Focus on the Core. Reduce Risk. Rebuild Trust.
All information based on public sources – presentation available on www.simplify-aryzta.com Extraordinary shareholder meeting on September 16th, 2020 How will the Shareholder Group vote?
X X X Chairman with X in-depth bakery X experience, X X knowledge of Aryzta X X and significant time X X availability required X to support the X X X company. X X X Mandates of A. Schmid have not been publicly disclosed. Accor- X ding to Handelszeitung Aryzta would be his 11th mandate and th X his 4 at a troubled company
th Source: Screenshot from the online voting tool on ip.computershare.ch/Aryzta, Handelszeitung (August 13 , 2020), VERAISON 2 Important information
This document is for general information only and not intended to be exhaustive nor to create any legal obligation. The information stated herein reflect the view of VERAISON Capital and Cobas Asset Management only and are not agreed or with any third parties nor binding for VERAISON Capital and/or Cobas Asset Management. The information provided should not be relied on by any person for any purpose and should not be construed as investment, financial, legal, tax or other professional advice. In particular this document is not intended to be, nor should it be construed as, an offer to sell or a solicitation or an offer to buy any fund, security or other financial instrument. This document does not recommend the purchase or sale of any fund, security or other financial instrument. No information in this document is to be relied upon for the purpose of effecting or mediating investments or any other transaction. This document is not intended to be binding or restricting in any way nor deemed to imply any explicit or implicit intention, offer, confirmation or agreement with respect to the vote, sale, acquisition or any other action in relation to any financial instrument or company. VERAISON Capital, any related party (including members of the shareholder group as notified to the Swiss SIX Exchange) and any fund advised by it and any related party explicitly remain free with respect to the voting, sale and acquisition of any financial instrument. In particular VERAISON Capital any related party (including members of the shareholder group as notified to the Swiss SIX Exchange) and any fund managed by it and any related party may at any time in the future, without notice to any person, increase or reduce its holdings in shares of Aryzta AG and/or buy or sell any derivative or other financial instruments relating to Aryzta AG, in each case irrespective of whether or not all or any of its objectives are or are expected to be implemented. VERAISON any related party (including members of the shareholder group as notified to the Swiss SIX Exchange) and any related party reserves the right to change any of its opinions, objectives, actions or plans expressed herein at any time as it deems appropriate The document is based on public facts available to on the date hereof. No representation or warranty, express or implied, is made as to, and no reliance should be placed upon the accuracy, completeness or correctness of the information or opinions contained herein There is no assurance or guarantee with respect to the prices at which any securities of companies referred to herein will trade, and such securities may not trade at prices that may be implied herein. Any responsibility or liability for any loss howsoever arising from any use of or reliance on this document is expressly excluded. The information set out herein may be subject to updating, completion, revision, verification and amendment. There is however no obligation to update the data, information and opinions contained in this document. The document may contain “forward looking” statements. All statements that are not clearly historical in nature or that necessarily depend on future events are forward looking, and the words “anticipate,” “believe,” “expect,” “potential,” “opportunity,” “estimate,” “plan,” or the negative of such terms or other variations on such terms or comparable terminology and similar expressions are generally intended to identify forward looking statements. Any forward-looking statements are based on the current intent, belief, expectations, estimates and projections as of the date of this document. These statements are not guarantees of future performance and involve risks, uncertainties, assumptions and other factors that are difficult to predict and that could cause actual results to differ materially. Accordingly, you should not rely upon forward looking statements as a prediction of actual results and actual results may vary materially from what is expressed in or indicated by the forward-looking statements. This document is not directed at any person in any jurisdiction where, by reason of that person’s domicile, residence or nationality or other, the publication or the availability of the present document would be prohibited.
© 2020 VERAISON Capital Ltd All rights reserved 3 Simplify Aryzta
Aryzta can rely on… ➢ Fundamentally attractive markets ➢ Strong position in its core segments with leading customer base ➢ Dedicated employee base
… but needs to ➢ Focus on the core ➢ Reduce risk ➢ Rebuild trust
Source: Hiestand website 4 Simplify Aryzta: Focus on the Core. Reduce Risk. Rebuild Trust. Executive Summary
Significant destruction of shareholder value, unsustainable financial position and continued business underperformance
▪ Total shareholder return of -95% over 5 years and continued value destruction after highly dilutive capital increase in 2018
▪ Unsustainable financial structure with high debt load puts Aryzta in the hands of creditors → dedicated and timely action required
▪ Major business underperformance and missing turnaround after capital increase in 2018 → core business to be strengthened
Simplify Aryzta: Focus on the core to drive profitable growth and reduce risk profile
▪ Aryzta with significant complexity in a fundamentally local business
▪ Additional disposals of € 600+m to reduce financial leverage/risk profile (no fire sale, subject to review by the new Board)
▪ Focus on the core to drive profitable growth: Revive innovation, strengthen strategic partnerships and empower people
Renew leadership with respected bakery industry experts to rebuild trust, initiate focusing strategy and support business turnaround
▪ Urs Jordi, Heiner Kamps and Armin Bieri offer strong bakery experience & complementary skills to strengthen Aryzta
▪ Candidates will support Aryzta from day 1 thanks to their deep knowledge of Aryzta/bakery industry and significant time commitments
▪ Chairman candidate proposed by the Board lacks relevant bakery industry experience and is overborded1
1. Not sufficient to hand over major mandates in 6-9 months or to merely give up some of the smaller mandates 5 Agenda
1) Significant value destruction, unsustainable financial position and continued underperformance
2) Simplify Aryzta: Focus on the core and reduce risk profile
3) Renew leadership to rebuild trust
6 Long history of disappointments and value destruction
Aryzta share price (CHF)1 Over 70% decline 100 2 Sep. 2016 since capital increase Aug. 2008 Gary McGann named Chairman Aryzta is formed
-70%2
Sep. 2017 Kevin Toland 50 Takes over 1
as CEO
leading to 10x of a dilution to leading Capital increase of of CHF 900m increase Capital
Feb. 2017 Owen Killian resigns as CEO 0 0 01/08 01/09 01/10 01/11 01/12 01/13 01/14 01/15 01/16 01/17 01/18 07/18 07/19 07/20
Continuous destruction of value since 2014 – clearly caused by concerns regarding the company’s strategy and execution rather than just the current Covid-environment
th th 1. Not adjusted for dividends, rights issue 2. From Nov. 7 , 2018 (first ex-rights date) until June 30 , 2020 Sources: Bloomberg, corporate reporting 7 Total Shareholder Return (TSR) highly negative & massively behind peers
Total shareholder return (% p.a.)1 Aryzta FlowersFoods Grupo Bimbo
50%
10.8% 12.8% 6.2% 4.7% 0% -0.2% -0.6% -4.4% -2.5%
-25.5%
-50% -46.2%
-60.1% -61.7%
-100% 10 years 5 years 3 years 1 year
th 1 Analysis as of June 30 2020 – incl. reinvested dividends, local currency Sources: Bloomberg 8 Aryzta’s financial structure is not sustainable – timely action required
Total net debt of € 1.5bn or 7.3x EBITDA (as of Jan 31st 2020) 2.5x – 3.0x EBITDA seen as industry standard
Credit financing1 € 884m “We, the new management team and I, told ourselves that we needed an understanding of what a normal company in our Cash2 € 317m industry has to be like. […] It would have a ratio of net debt to EBITDA of 2.5x to 3x. And the hybrid bonds that are recorded in equity on our balance sheet must be added to the debt.” Bank covenant net debt € 567m Kevin Toland, October 2018 (FuW)
Hybrids € 906m
Total net debt € 1’473m 2.4x EBITDA (based on 2019A)
4 4 Net debt / EBITDA : 3.1x EBITDA (based on 2020F) EBITDA 2020 analyst estimate € 202m 7.3x
Market cap (30.6.20)3 € 400m
Important to get Aryzta «out of the hands of creditors» to be able to drive business and invest for the long-run
1. Term debt net of borrowing costs, incl. repayment from sale of Picard and estimated € 0.3m finance leases pre IFRS-16 (as in FY 2019) 2. Incl. cash equivalents, net of overdrafts 3. Share price of CHF 0.42, 1 EUR = 1.06 CHF th th 4..Forecast by Goodbody Stockbrokers as of June 9 , 2020 Sources: Corporate financial reportings, Goodbody, Finanz und Wirtschaft (26 of October 2018) 9 Backup
Long history of extreme financial leverage
High payments to debt holders while market cap declined
Total net debt (€m) Total net debt / EBITDA Hybrids Net debt financing facilities Total net debt / EBITDA 6′000 8x 7.6
7.31 5′000 6.0 6x 5.2 4′000 4.2 4.1 3.8 3.8 3′000 4x 3.1 3.2 2′476 2′545 2′536 2.7 2′276 2′302 751 825 802 2′000 634 792 1′601 1′600 1′473 1′278 2x 1′116 1′252 624 866 1′000 297 302 906 1′642 1′725 1′720 1′734 1′510 1′116 955 976 976 733 567 0 0x FY 2010 2 FY 2011 2 FY 2012 2 FY 2013 2 FY 2014 2 FY 2015 2 FY 2016 FY 2017 FY 2018 FY 2019 H1 20201 Total4 Payments to 45m 72m 84m 85m 96m 120m 131m 97m 98m 106m 96m1 over 1bn debt holders (€)3 Market cap 2’598m 3’150m 3’558m 4’093m 5’980m 4’098m 2’989m 2’416m 1’087m 745m 400m6 FY end (€)5
1. Balance sheet items as of January 31st, 2020 – Payments based on H1 2020 multiplied by 2 Total net debt / EBITDA based on 2020F from Goodbody (as of June 9th) 2. Food only – excluding Origin 3. Net interest plus st th hybrid dividends (whether dividend paid or accrued) amortized upfront financing costs 4. Sum of 2010 to today 5. Market cap at end of FY (July 31 ) 6. As of June 30 2020 (CHF 0.42) Source: Aryzta financial reporting10 Major business underperformance, especially in North America & Europe
Europe: Stagnating North America: Decline Rest of World: Growth
-7.9% p.a. 1.0% p.a. 1 942 1 908 1 799 1 747 1 739 1 711 1 713 1 586 1 647 1 587 1 392 1 372 1 460 1 468 1 398 1 185 1 274 1 213 +4.2% p.a.
(EUR m) & m) (EUR 222 234 221 231 224 259 257 272
1 180
15% 16% 16% 17% 17% 16% 9% 6% 7% 17% 16% 17% 16% 16% 16% 15% 16% 15% Sales 17% 17% 17% 18% 17% 16% 12% 10% 10% 2011 2012 2013 2014 2015 2016 2017 2018 2019 2011 2012 2013 2014 2015 2016 2017 2018 2019 Underlying EBITDA (%) EBITDA Underlying 2011 2012 2013 2014 2015 2016 2017 2018 2019
▪ Organic sales3: 2.0% p.a., M&A: -0.5%, FX: -0.5% ▪ Organic sales3: -4.5% p.a., M&A: -3.8%, FX: 0.5% ▪ Organic sales3: 7.5% p.a., M&A: 0.0%, FX: -3.4% ▪ Stagnation since 2016 ▪ Organic decline: Lost market share ▪ From small base participating in growing market
-70% -39% 327 300 2 270 284 275 275 229 213 232 211 216 +16% 196 172 168 183 170 90 98
30 36 39 35 36 35 39 40 42
EBITDA Underlying Underlying 2011 2012 2013 2014 2015 2016 2017 2018 2019 2011 2012 2013 2014 2015 2016 2017 2018 2019 2011 2012 2013 2014 2015 2016 2017 2018 2019
Losing market shares despite leading Major decline of top- and bottom-line Profitable growth but from a small base positions in Europe (70% decline in EBITDA and -8% p.a. in (2% organic growth vs. ~4% market) sales over the last 4 years)
1. Aryzta sales include organic, M&A, and currency effects 2. Underlying EBITDA defined by company as “before impairment, disposal, and restructuring related costs” 3. Break-down of organic growth since 2011 Source: Aryzta financial reporting 11 Aryzta massively underperforms listed peers in North America
North America business
Sales1 (USDm) and underlying EBITDA (%) Sales (USDm) and adjusted EBITDA (%)
-7.7% p.a. 2.2% p.a.
3 952 4 124 2 156 2 111 2 030 3 779 3 927 3 921 1 733 1 565
17% 16% 9% 6% 7% 12% 11% 11% 10% 10% 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019
North America business
Sales (USDm) and underlying EBITDA (%) Sales (CADm) and adjusted EBITDA (%)
0.1% p.a. 0.5% p.a. 2 144 2 268 2 243 2 122 2 155 7 317 7 229 7 290 7 472 7 461
8% 9% 9% 9% 10% 13% 13% 11% 11% 10% 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019
1. Aryzta sales include organic, M&A, and currency effects. 2. Aryzta underlying EBITDA defined by company as “before impairment, disposal, and restructuring related costs”; Other company “adjusted” or “underlying” EBITDA as reported by company itself. Aryzta, Bimbo North America numbers converted to USD using annual avg. exchange rates 12 Promises from capital increase have not been fulfilled – also pre-Covid
Improved EBITDA – FAILED Deleveraging – FAILED
Claimed ambition: «Delivery of improved EBITDA through margin Claimed ambition: Committed to € 1bn deleveraging plan over 4 growth driven by increased volumes and price increases»1 years. At least € 450m of asset disposals and balance from cash Mid-term Target of 12-14% underlying EBITDA flow generation»1 plus Equity capital increase of up to €800m
Underlying EBITDA pre-IFRS 16 (€ m) €m Total net debt3 Market cap 300 3′000 12-14% 2′311 «Deleveraging» -19.2 200 2′000 • €740m net proceeds 9.0% 9.3% 5 8.5% 8.9% 8.6% from capital increase 1′474 1′088 • €380m from disposals4 100 1′000 • Negative cash flow 161 152 156 141 142 effect of - €280m 4004
0 0 H1 2018 H2 2018 H1 2019 H2 2019 H1 20202 Ambition July 20186 Today
“We recognize that we are asking you to entrust us with additional capital. We are “Continued strategic and confident in the outlook for the frozen B2B bakery market, which is in steady growth, financial progress” and in our ability, over time, to capture our fair share of that growth. .“ Aryzta H1 2020 investor presentation Gary McGann, Shareholder letter 2018
1. Aryzta Investor Presentation Sept. 2018, p. 16. 2. Excl. IFRS 16 effect of € 27.7m – leading to reported EBITDA of € 169.8m 3. Incl. Hybrid instruments 4. According to management, 85% of disposal target of €450m achieved 4. Market cap on June 30th, 2020 (CHF 0.42 per share) 5. As of Jan 31st, 2020 (H1) 6. Total net debt according to prospectus and market cap as of July 31st, 2018 (CHF 14.01 per share) Source: Aryzta corporate reporting and investor presentation, Aryzta letter to shareholders 2018 13 Equity analysts concerned about progress – already before Covid
“a miss. Aryzta published a weak result on organic growth as well as EBITDA before IFRS-16 effects, but free cash flow as well as net income were a tick better. However, what puzzles us is that net debt increased, which is a bad sign given that Aryzta has stretched debt ratios.“
Main First, March 10th, 2020
“Just looking back. I mean we’ve had persistent negative volumes in North “Aryzta has a stretched balance sheet” America now for quite a number of years, obviously more acute in Q4 2019 UBS, January 24th, 2020 Cathal Kenny, Davy, October 15th, 2019
“Profitability guidance … revised. Another very difficult half-year for Aryzta, with ongoing negative growth, sharp decline in profitability and significant one-offs. We can only repeat our ongoing concerns regarding whether the company has the right tools to track the company's real performance (Management Information System). On Nov. 22nd, the CEO stated that visibility in terms of costs in North America was "very, very good"
Vontobel, March 10th, 2020
Additional bakery industry expertise required to turn around business performance
Source: Equity research comments 14 Agenda
1) Significant value destruction, unsustainable financial position and continued underperformance
2) Simplify Aryzta: Focus on the core and reduce risk profile
3) Renew leadership to rebuild trust
15 High complexity in a fundamentally local business – focus required
Large product assortment across 5 continents relying on various brands
Artisan bread & bread rolls Buns «Private label» + «Aryzta brands»
Sweet Baked Goods Morning Goods
in 4 channels
Savoury Other Large retail QSR1
combining bakeries & foodservice Convenience/indep. retail Other foodservice Bakeries Foodservice ▪ Industrial production ▪ Distribution business ▪ Asset-intensive ▪ Asset-light ▪ Several large customers ▪ Fragmented customers
Enable management to drive profitable growth in the core businesses (for which businesses is Aryzta the best owner?)
1. QSR = Quick Service Restaurants 16 Focusing on the core to allow for significant reduction of risk profile
Financial structure (latest published figures) Additional disposals of € 600+m should be assessed
Aryzta Half year 2020 report (as of January 31st, 2020) ➢ Additional asset disposals of € 600+m would allow to Credit financing1 € 884m reduce all or large part of bank covenant net debt3, getting Aryzta out of the hands of creditors
Cash2 € 317m ➢ This will allow Aryzta to invest again into the business in order to return to profitable growth Bank covenant net debt € 567m ➢ Yet, no fire-sale to be sought
Hybrids € 906m ➢ Rather, new Board should conduct an independent assessment on financial structure and where Aryzta Total net debt € 1’473m can add long-term value
1. Term debt net of borrowing costs, incl. repayment from sale of Picard and estimated € 0.3m finance leases pre IFRS-16 (as in FY 2019) 2. Incl. cash equivalents, net of overdrafts 3. Depending on net debt st th development since January 31 , 2020 Sources: Aryzta and corporate financial reportings, Finanz und Wirtschaft (26 of October 2018) 17 De-leveraging via operating cash flows impossible (more so post Covid)
Cash flows (€m) Adjusted Operating Free Cash Generation1 Net interest (incl. hybrid dividends)2
€ 391m € 264m € 119m € 69m € 112m -€ 120m -€ 131m -€ 97m -€ 98m -€ 106m
FY 2015 3 FY 2016 FY 2017 FY 2018 FY 2019
- €1m €260m €167m - €21m €6m (€m)
No cash flow to reduce debt in last 2 years – average of €80m over the last 5 years
Op. cash flows cash Op. to reduce debt debt reduce to
History indicates it will take over 5 years to bring Net Debt/EBITDA below 3x (even without impact of Covid)
1. Operating free cash generation according to annual report – less proceeds from sale of assets and income taxes paid 2. Gross interest paid less interest received plus hybrid dividends (regardless of whether the dividends were paid out or accrued) plus amortized upfront financing costs 3. Food only – excluding Origin Sources: Aryzta Financial reporting 18 Important to prevent customers/suppliers being drawn in negative spiral
Capital market has lost trust in Aryzta – risking to create a negative spiral
Depressed share and hybrid prices clearly show lack of trust
Instead of stabilizing Aryzta, the Bord of Directors is further putting the company at risk and keeping all stakeholders (employees, customers, shareholders partners, share & bond holders) in an unacceptable unclear situation by ▪ Forcing a strategic review prior to a requested Board renewal Hybrid ▪ Putting the company up for sale Customers? holders ▪ Delaying the EGM by 4 months (prolonging the interim period) Suppliers? ▪ Announcing a conditional chairman retirement ▪ Nominating a new chairman candidate at short notice after voting has already started and without explaining how it will be effected (e.g. what happens to instructions already given to indep. Proxy?)
Capital increase in 2018 was justified with increased pressure from customers/suppliers → timely action needed to prevent entering a similar situation in the future
19 Revive innovation & entrepreneurship to return to profitable growth
Develop an engine for profitable growth Selected areas of innovation by product category
Accelerate Accelerate ➢ Bread: Artisanality, stone/wood oven product innovation Channel Penetration ➢ Rolls: Preproven instead of half-baked
Value proposition: ➢ Pastries: French Style, Co-Branding Aryzta as Gold Standard for in store bakery solutions & experience ➢ Snacking: Grap and Go
➢ American Bakery: New Shapes and Flavours Accelerate quality Accelerate & efficiency gains Customer Development ➢ Buns: New look and recipe
Important to strengthen bakery expertise at the very top
20 Strengthen strategic partnerships to grow with key customers
Important measures Selected key accounts
➢ Strengthen relationships on C-Level Retail ➢ Renovate/innovate their core product range ➢ Evaluate production JV if it makes sense
➢ Strengthen relationships on C-Level Quick Service Restaurants ➢ Strengthen sales structure with category know how ➢ Constant quality improvements
➢ Innovate and expand core portfolio Convenience ➢ and Caterer Category knowledge to drive same store growth ➢ Branding at POS1 to strengthen consumer trust
Note: List of selected key accounts is not comprehensive 1. Point of Sale Source: Expert discussions 21 Empower People
Today: Complex 3-tier structure
Group Executive Mgmt CEO Kevin Toland
CEO CEO COO COO Chief Chief Chief General Europe North America APMEA1 Latin America Financial Officer Strategy Officer People Officer Counsel2
Regional level e.g. CEO Europe
FSB Country heads Germany Ireland/UK France Switzerland Benelux Nordics Poland Eastern Europe (Cuisine de FR) (Coupe de Pate) (Hiestand) (PrePan) (Mette Munk) (Fonetti) Europe
Manufacturing Commercial Regional support Finance HR (incl. payroll) Procurement IT functions Excellence Excellence
Country level e.g. Head Germany
Sales Sales Production Marketing Quality Finance IT Bakery Food Solutions & SCM3
Complexity and long decision lines in a fundamentally local business
1. Asia/Pacific, Middle East and Africa 2. and Company Secretary 3. Supply Chain Management 22 Agenda
1) Significant value destruction, unsustainable financial position and continued underperformance
2) Simplify Aryzta: Focus on the core and reduce risk profile
3) Renew leadership to rebuild trust
23 Renew leadership to rebuild trust and simplify Aryzta
Proposed changes to the Board of Directors
The shareholder group requested an Extraordinary General Meeting on May 20th to propose
➢ the election of Urs Jordi, former CEO of listed Hiestand Holding AG, as Chairman of the Board
➢ the election of Heiner Kamps, founder of bakery chain Kamps to the Board
➢ the election of Armin Bieri, former CEO Aryzta Switzerland and Food Solutions Asia Pacific, to the Board
➢ the removal of the 4 longest serving Board members (Gary McGann, Annette Flynn, Dan Flinter and Rolf Watter) – serving on the Board since at least 2016 and having overseen significant and consistent value destruction
➢ that Kevin Toland focuses on his role as CEO in view of current business challenges and in line with modern corporate governance
24 Strong bakery experience & complementary skills to strengthen Aryzta
Proposed new candidates Remaining Board members1
Urs Jordi Heiner Kamps Armin Bieri Tim Lodge Alejandro Legarda Luisa Delgado
▪ Experienced CFO and ▪ Transformation and ▪ B2B commercial transformation expert restructuring expert experience in FMCG in agri & food industry ▪ Track record in Europe ▪ Track record in Europe ▪ Track record in UK3 (esp. Southern Europe) (incl. Nordics)
James Leighton Greg Flack Michael Andres ▪ Proven leader in ▪ Successful food/bakery ▪ Strong track record of bakery industry: entrepreneur: driving commercial ▪ Experienced CEO and ▪ CEO and turnaround ▪ Long career at in-depth understanding major business excellence and COO in food industry expert in food industry McDonalds (biggest of operations, logistcs transformation and profitable growth in ▪ Track record in USA, ▪ Track record in North customer of Aryzta) and organisation restructuring experience bakery industry Australia & NZL3 America ▪ Track record in USA ▪ Focus on Europe (esp. ▪ Focus on Germany and ▪ Focus on Asia/Pacific CH, FR, Benelux & other European and Europe Eastern-Europe) markets
▪ Candidates will strengthen Aryzta from day 1 (deep knowledge of Aryzta/bakery industry & significant time commitments) ▪ Combining all relevant skills and experiences together with remaining board members
1.If all proposals from the shareholder group are supported by shareholders 3. According to Aryzta website Sources: Aryzta Corporate Governance Website 25 Election of Urs Jordi as Chairman of the Board – Proven leader with 25 years of in-depth experience in the bakery industry
Executive experience in the bakery industry ▪ 2010-2013 CEO Aryzta Food Europe and Asia Pacific ▪ 2007-2010 CEO Hiestand Group (separate listed company and as of 2008 part of Aryzta) ▪ 2004-2007 Chief Operating Officer Hiestand Group ▪ 2002-2004 Head of Production & Logistics, Member of the Executive Board, Hiestand Group ▪ 1996-2002 Managing Director of Hiestand and Fluery Michon in Poland ▪ 1989-1995 Member of Executive Board of Jowa AG (leading Swiss bakery, part of Migros)
Urs Jordi Major directorships ▪ 2019-2020 Vandemoortele NV (bakery group) – left the Board to focus on Aryzta candidature Independent candidate for (leading European producer of bakery products as well as margarines, culinary oil Chairman of the Board and fat with revenues of € ~1.5bn and over 4’000 employees) ▪ 2009-today Schweizer Zucker AG (sugar industry) Swiss (1965) Education ▪ Trained baker and confectioner ▪ Business administration degree from NKS (Aarau, Switzerland)
“We know Urs Jordi from his previous work as a down-to-earth manager with a great deal of expertise in baking. Overall, the Board of Directors would be strengthened with significantly more industry expertise, which is to be welcomed.” ZKB equity research comment by Patrick Schwendimann (22. May 2020)
Source: ZKB broker report 26 Backup
Urs Jordi: Hiestand success story under his leadership
22% p.a. profitable sales growth… … leading to a 10x share price increase
Sales and EBIT (CHFm) Hiestand share price (CHF per share) 1 000 4’000
10x 741 750 3’000 2’759 22% p.a.
516 500 450 2’000 398 332
250 1’000
268 9% 0 9% 10% 10% 10% 0 2003 2004 2005 2006 2007 01/03 01/04 01/05 01/06 01/07 01/08
Source: Hiestand corporate reporting, Bloomberg 27 Election of Heiner Kamps as Member of the Board – German food entrepreneur with business transformation & financial track record
Executive and entrepreneurial experience in the food industry ▪ 1981-2002 Founder and CEO of Kamps AG, which within 20 years became Europe’s largest baking group with over 1’000 branches & € 1.8bn sales. In 1998 Kamps AG was listed on the stock exchange and in 2002 acquired by Barilla. ▪ 2005 Acquisition of a majority of Nordsee, Europe’s largest quick service restaurant for sea food specialty which currently operates 350 branches in Europe1 ▪ 2007 Acquisition of the Homann delicatessen group, which was subsequently expanded to form the market leader in the delicatessen industry in Europe with around 3’000 employees and € 640m sales. Heiner Kamps ▪ 2011 Integration of Homann and Nordsee into Unternehmensgruppe Theo Müller ▪ 2011-2015 CEO of Unternehmensgruppe Theo Müller, a family-owned food company with Independent candidate € 5.7bn sales and 24’300 employees for member of the Board ▪ 2015-2018 Chairman of Unternehmensgruppe Theo Müller Current mandates German (1955) ▪ KFRH Kamps Management GmbH (investment fund of Heiner Kamps) ▪ Member of the Advisory Board of Deutsche Bank in NRW (until the end of 2020) Education ▪ Trained baker and confectioner (incl. diploma as master baker & industrial master baker) ▪ Studies of business administration
“Heiner Kamps went from craftsman to entrepreneur and manager. The entrepreneur and manager finally became the investor and producer. But he is also a good man, uses bread in the fight against misery. His foundation "Brot gegen Not" helps people who live their lives on the streets” Florian Ferstl, editor-in-chief Focus Online2
1. Majority stake acquired together with other private investors (incl. Theo Müller) 2. Florian Ferstl on Heiner Kamps as he received the Quality Life Forum Award for his life's work 28 Election of Armin Bieri as Member of the Board – Strong track record of driving commercial excellence and profitable growth in bakery industry
Executive experience in the food industry ▪ 2005-2016 Aryzta/Hiestand − CEO Hiestand Switzerland: Expand into new channels, build strong partnership with top customers, renovate and innovate core product range − Group Head Sales & Marketing and member of the Exec. Board of Hiestand: responsible to develop global growth strategy − CEO ARYZTA APAC: expand into new markets and channels ▪ 2000-2005 Unternehmensgruppe Theo Müller Armin Bieri Managing Director International: Expand into new markets organically and M&A ▪ 1995-2000 Nestlé SA Independent candidate − VP Communication Nestlé Switzerland: Launch online Marketing and first online for member of the Board Webshop (now LeShop) − Swiss (1958) VP Coffee and Innovation Nestlé USA: Restructure entire Coffee Portfolio, sell non- core Businesses and Brands, innovate the core business (Nescafé) ▪ 1990-1995 Coca Cola AG Switzerland Director Sales & Marketing: Develop new channels, products & packaging (PET) Education ▪ Business degree from the University of St. Gallen (lic. oec. HSG)
“As CEO Hiestand Switzerland and Head Group Sales & Marketing Armin was responsible for developing and implementing the Hiestand Growth Strategy in all markets. With his energy, empathy and strategic thinking Armin was key for the profitable growth path of Hiestand.“ Wolfgang Werlé – former Chairman of the Board of listed Hiestand Group
29 All proposed new Board members are fully independent
➢ All Board members proposed by the shareholder group are fully independent.
➢ They have no obligation towards any member of the shareholder group in relation to their Board mandate and
will act as independent Board members in the interest of the company and all its shareholders.
➢ The views expressed by the Board candidates are based on their own assessment and are subject to their own
review of the business of the company as board members if elected.
➢ For regulatory purposes Heiner Kamps is disclosed as member of the shareholder group on the SIX Swiss
Exchange as he owns Aryzta shares. As disclosed, Heiner Kamps will no longer be a member of the group after
the next shareholder meeting but a fully independent board member (if elected).
30 Andreas Schmid is not the right Chairman to lead the transformation
Overboarding – no public disclosure of mandates No relevant bakery experience
1) Chairman of listed Flughafen Zürich AG Highly challenged “He [Andreas Schmid] really has no idea Zurich airport, market cap CHF ~4bn ! due to Covid-19 about industrially produced bakery 2) Member of the Board of gategroup (www.gategroup.com) products & the corresponding markets.” Highly challenged Airline-Caterer with CHF ~5bn revenues – listed until 2017 th 3 ! due to Covid-19 Handelszeitung, August 13 , 2020 Distressed listed bond currently trading at 63%1 3) Executive Chairman of Helvetica Capital AG Private equity company with 30 active investments & “Barry Callebaut is a food ingredient CHF 600+m invested (https://www.helvetica-capital.ch/en/) provider serving industrial food Allegations of breach of manufacturers, which is a very different 4) Chairman of private Nüssli AG (www.nussli.com/en/) criminal & civil law business model than Aryzta as a Global leader in provision of temporary structures ! against A. Schmid4 & capital increase to specialty bakery serving B2B commercial for sporting, cultural & business events restructure balance sheet accounts. They have different financials, 5) Director of Steiner AG, Swiss real estate developer and business investment criteria, different Internal challenges contractor CHF 830m revenues (https://www.steiner.ch/en/) ! customer base and entirely different strategy and foresight imperatives.” 6) Co-owner of Wirz Partner Holding AG, PR/communication agency Debra Bachar, Blueberry Business Group2 7) Member of Board of Trustees of Avenir Suisse, think tank Additional mandates? – No public disclosure of current mandates and potential ➢ Broad business & food industry resignations (clearly ignoring interest of shareholders for transparency) experience does not compensate for needed bakery experience ➢ New Chairman must commit significant time to Aryzta starting from the EGM, (especially since no other BoD not just 6-12 months later (if relevant mandates are handed-over by then) member has bakery experience)
1. gategroup Finance bond - maturity 2022 (ISIN: CH0353945394) 2. Debra Bachar is the founder & President of Blueberry Business Group, an advisory group focusing on food companies 3. Translated from the German original 4. SonntagsZeitung (May 17th, 2020) Source: Websearch, Handelszeitung 31 Andreas Schmid: Comments from analysts & media on his nomination
“Aryzta proposed that Mr. Schmid is to succeed Mr. McGann at the EGM in September. Mr. Schmid is a well-known Swiss executive. His track record includes Barry Callebaut (CEO & chairman), Symrise (chairman), gategroup (chairman), Kuoni (chairman), Flughafen Zurich (chairman) Adecco (board member) and Davidoff (chairman). This analyst covered the first 5 of the mentioned names and we would point to a mixed track record, especially in food & beverage related companies. Mr. Schmid was responsible for the failed branded- chocolate strategy as CEO at Barry Callebaut, a weak strategic phase at Symrise with a failed merger attempt (with Givaudan) and significant profitability declines at gategroup. We would have also wished that Aryzta would have proposed a leader with more familiarity with the frozen bakery segment.” Baader Helvea Equity Research, August 13th, 2020
“I especially remember his work at airline caterer gategroup: Schmid was Chairman of g ategroup when the company was attacked by hedge fund RBR Capital Advisors: Its manager Rudolf Bohli criticized that the management of the airline caterer, including Schmid, had been very well compensated, but had performed poorly. The fight ended when Schmid sold gategroup to the controversial Chinese HNA Group - at a much too low price, as not only Bohli criticized.” NZZ The Market, August 13th, 20201
“If Schmid is elected, the wobbling bakery group would be his eleventh mandate. And his fourth mandate with a company in a serious crisis. […] So you would think that Schmid would have enough to do strategically even without Aryzta's presidency.” Handelszeitung, August 13th, 20201
Market reacted negatively: After the announcement Aryzta share price dropped by 6% in the first 2 hours (in an overall stable market)
1. Translated from the German original Source: Baader Helvea, NZZ The Market, Handelszeitung, Bloomberg 32 Removal of the 4 longest serving Board members having overseen significant and consistent value destruction
Continued value destruction Leadership has to be renewed to rebuild trust
Aryzta share price (CHF, adjusted for rights issue) 4 longest serving Board members to be dismissed 25
✓Gary McGann– Resigned1 20 Annette Flynn Gary McGann (first elected 12/14) (first elected 12/16) ✓Dan Flinter – Resigned1
15 ✓Rolf Watter – Resigned1 Rolf Watter (first elected 12/16) 10 ▪ Annette Flynn
Longest serving Board member 5 Member of the Audit Committee since December 2014 Dan Flinter (first elected 12/15) and Chair of the Audit Committee since December 2015 0 01/14 01/15 01/16 01/17 01/18 01/19 01/20
1. Effective as at the conclusion of the EGM; 2. Letter to Aryzta shareholders from July 20th, 2020 Sources: Bloomberg, Aryzta Corporate Governance Reporting 33 Annette Flynn oversaw € 2.1bn in impairments/write-downs and 7 “profit warnings” as Chair of the Audit Committee since 2015
Repeated impairments of over € 2.1bn 7 “profit warnings” in 3 years
0 Date Profit warning (key messages) Share price1 € -14m € -12m -€ 139m -€ 175m 1 24 Jan 2017 “Underlying fully diluted EPS is tracking ~20% CHF 9.45 behind prior year” 2 30 May 2017 “Prior guidance should not be relied upon” CHF 7.21 -€ 437m Optimisation of European capacity will take -250 -€ 188m significantly more time than anticipated – North America weak € -363m 3 25 Jan 2018 EBITDA likely to be ~15% below previous CHF 8.02 -€ 595m guidance. Europe and North America under- -500 performing expectations 4 24 May 2018 EBITDA will be ~9-12% below previously CHF 4.47 adjusted guidance -€ 461m 13 Aug 2018 Rights issue announced CHF 1.89 -750 5 8 Oct 2019 Revenue challenges in North America remain – CHF 0.72 -€ 126m sales development behind expectations € -859m 6 10 Mar 2020 “North America underlying EBITDA outcome CHF 0.65 € -898m significantly behind” – near to medium term -1′000 expectations revised 2016 2017 2018 2019 2020 7 24 Mar 2020 It is now clear that Covid-19 will have a CHF 0.37 material impact on Group performance (2 weeks before at the H1 results conference Impairment of intangibles Loss on disposal of assets and businesses the company stated “guidance assumes no Impairment of goodwill material or prolonged impact from Covid-19”)
1. Closing share price on the previous day Sources: Aryzta media releases (as disclosed on the website) and financial reporting, Bloomberg 34 Current BoD failed to assess shareholder friendly strategies
Capital increase in 2018 Opportunities to reduce financial leverage
! • € 800m cap. increase (€ ~740m net) - High dilution of 10x According to media reports, there were multiple opportunities before • BoD failed to assess financial risk on time: cap. Increase was and after the capital increase to reduce the risk profile of Aryzta through implemented as matter of urgency and BoD did not assess nor targeted disposals allowed shareholders to vote on alternatives
“The Board of Directors never seriously considered the Post Capital increase in 2018 big liberation […]. But there would have been serious offers even before the last capital increase in 2018. For • BoD failed to effectively address unhealthy financial structure example, a financial investor with allies from industry is • Even after shareholder initiative and Covid drain BoD has not presented said to have offered between 1.2 and 1.8 billion dollars for the US business. […[ But the shareholders were not a viable strategy – now focusing on a sale informed of this. It was always said that there were no offers, that there was no alternative to the path taken. “The proposed timing of the EGM […] facilitates the strategic and That is why the confidence in the current board of financial review which is an urgent and important initiative for directors is no longer without limits, even among the Company in all circumstances. The timely completion of the smaller shareholders.” review and identification of strategic options is of paramount 1 importance and in keeping with the Board’s fiduciary duties to all Handelszeitung, June 11th 2020 its stakeholders […]” Aryzta News, May 25, 2020
1. Handelszeitung, June 11th, 2020 – translated from the German original Source: Handelszeitung, Cobas presentation from October 2018 35 Long history of shareholder frustration & disregard of minority rights
AGM 2016 ▪ Election of Gary McGann as Chairman of the BoD with weak support amid concerns about overboarding (80.5% yes vs. 19.3% no)
AGM 2017 ▪ Advisory vote on the Compensation Report approved only by 54.9% of the votes (rejected by 44.8%)
AGM 2018 ▪ Aug. 13, 2018: Need for capital increase announced ▪ Sept. 11, 2018: Announcement on short notice that date for the AGM is moved forward by more than a month leaving only 5 days to propose agenda item for shareholders - subsequent shareholder proposal not included in AGM agenda items but “forced” into EGM after AGM ▪ Ordinary capital Increase approved by only 52.9% of the votes (rejected by 47.0%) ▪ Discharge of BoD approved only by 64.7% of the votes (rejected by 31.4%) ▪ Re-election of Gary McGann approved only by 60.7% of the votes (rejected by 24.3%)
AGM 2019 ▪ Advisory vote on the Compensation Report approved only by 77.6% of the votes (rejected by 19.9%) ▪ Conditional capital for employee compensation approved with only 69.9% of the votes (rejected by 30.0%) – Board forced to publicly commit that shares reserved for all share plans will not exceed 5% of issued share capital and not to award options to BoD
ARYZTA “Would I take my Aryzta job now? Honestly, I don't know” Gary McGann in the Irish Independent (January 11th, 2019)
Source: Irish Independent 36 Board continues to disrespect trust & fundamental shareholder rights
Timeline since formation of the shareholder group Board delays shareholder vote in their own interest
▪ Swiss law asks for EGM to be held within reasonable time: typically 6-8 weeks – 4 months clearly not acceptable VERAISON informs No announcement Gary McGann about the on strategic review. formation of a shareholder Board postpones ▪ “BoD must convene EGM of shareholders within 2 months if shareholders 1 EGM to Sept. 16th group due to third parties representing at least 10% of the share capital request in writing”4 Public disclosure of having expressed an shareholder group Company nominates “unsolicited interest” A. Schmid as chair- ▪ Board delayed EGM to force a prior strategic review, pre-empting the right in acquiring Aryzta man. Still no update on strategy review of shareholders to decide on the Board which then sets the strategy EGM request nor sales process handed in by (still no update presented from the strategy review) shareholder group 12/5 13/5 20/5 25/5 20/7 13/8 ▪ On the very last day of the 2 months deadline the Board further delayed the EGM to mid Sept. and is now focusing on selling the company. Board announces → How can Bord claim that the interests are “unsolicited” after having that Rothschild will review all strategic Board commits to call the publicly announced a strategic review and approached many parties? and financial options EGM by mid-July with the until end of July2 EGM to be held by mid- August3 to complete the ▪ After the invitation was sent and voting started, BoD announced a new strategic review Chairman candidate – leaving relevant questions unanswered → e.g. what happens to instructions already given to the indep. proxy
EGM has been delayed for 4 months – putting Aryzta and the interests of all stakeholders at risk
1. After the stock market closed 2. Aryzta media release from May 13th, 2020 3. Aryzta media release from May 25th, 2020 4. Art. 9 AoA of Aryzta – BoD hast to hold the EGM within 2 months and not just to invite for it – otherwise EGM could be scheduled several months later, rendering the 2 months deadline meaningless Source: Aryzta media statements 37 Delaying tactic and self interests have become obvious to the public
“EGM will not be held until mid-August at latest. Aryzta is effectively a zombie company – We would anticipate legal action by shareholders for an earlier EGM.” Kepler Chevreux, May 26th, 2020
“[…] seems the board rather prefers a sale of the company than giving in on the activist shareholders demands.” Baader Helvea, Equity Research, July 20th, 2020
“Gary McGann obviously wants to spare himself the humiliation of being voted out of office at the extraordinary general meeting, and wants to draw the shareholders to his side with an alternative - expensively advised by Rothschild & Co” Finanz und Wirtschaft, July 22nd, 2020 – translated from the German original
“Even so, the underlying message seems to be that the board would rather sell the company than engage meaningfully with their own antagonized shareholders” Irish Independent, July 21st, 2020
“The managers of the bakery company Aryzta offer a picture of misery - they seem to be concerned only with saving their own face.” NZZ The Market, July 20th, 2020 – translated from the German original
“But it's clear now that McGann […] is determined to exit Aryzta on his own terms. […] it was looking increasingly difficult for the Irish businessman to emerge unscathed from a showdown at an extraordinary general meeting on the matter. […] News yesterday that Aryzta has received approaches from a number of unsolicited parties interested in taking over the group offers McGann the chance to extract himself with good grace.” The Irish Times, July 21st, 2020
Sources: Media and financial analysts as indicated above 38 Kevin Toland to focus on CEO role in line with good corp. governance
In only 13% of Swiss listed companies1 the CEO is also on the Board of Directors
Only CEO CEO and Board member CEO and Chairman of the Board
100% ▪ Separation of Ex.Com. and BoD is best practice in Switzerland 80% ▪ In the currently challenging business situation CEO should focus 100% on 60% 86% executive role ▪ Direct information exchange with 40% BoD should be secured via Chairman of the Board
20% ▪ In addition, information exchange is guaranteed through customary 7% 6% attendance by CEO at BoD meeting 0% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Today
1. Analysis is based on the SPI – which includes all equities listed on the SIX Swiss Exchange with a free-float of at least 20%, and excluding investment companies Source: University of Basel, Christophe Volonté (zRating) 39 Renumeration Committee to review current compensation scheme
Comparison of mgmt. renumeration 2016 vs. 2019 Key concerns
2016 2019 ▪ Mgmt incentives not aligned with shareholders ▪ End of Fiscal Year1 Share Price (CHF) 36.453 0.83 Over the last years there was no alignment between remuneration and share price developments
2 ▪ Total Executive Mgmt renumeration (€m) 8.4 19.1 ▪ Lack of disclosure of prospective targets ▪ Number of members 54 114 Under both the STIP and LTIP plans, the underlying performance criteria are disclosed but specific ▪ Average renumeration (€m) 1.7 1.7 performance targets are not made transparent. ▪ CEO renumeration2 (€m) 2.5 4.5 ▪ Extra annual bonuses Which reward individuals for actions that are ▪ Quantified short-term targets Yes No inherent to an executive's duties, e.g. the ▪ Quantified LTIP targets Yes No implementation of project renew.
Armin Bieri & Heiner Kamps to be elected to the renumeration committee to review Aryzta’s compensation scheme
1. July 31st of respective year 2. Incl. LTIP at target value for 2019 3. Pre-adjustment (CHF 7.60 incl. adjustment for rights issue) 4. Incl. 1 member who resigned in FY 2016 and 2 members who resigned in FY 2019 Source: Aryzta compensation reporting 40 Board of Directors did only enter pro-forma engagement discussions Overview of key engagement attempts
Engagement requests by Shareholder Group Reaction from the Board of Directors
▪ Since 2018 Cobas urged BoD repeatedly to address financial leverage & strategic issues ▪ March 11, 2020: Telephone conference between Cobas & Kevin Toland with the explicit No feedback at all request that concerns on financial risks & strategy are reported to the Board ▪ April 6, 2020: Cobas follows up with a letter to the entire Board April 21: Written promise to address issues expeditiously ▪ May 14, 2020: Videoconference of shareholder group with Gray McGann/Kevin Toland Involvement is ruled out. Gary McGann: “I strongly believe that with request to be involved in strategic review or provide staged/timely updates and as shareholders you have to select the right Chairman who then transparency (e.g. on May 26 with Q3 Trading Update) selects the CEO. Then you have to let them do their job” ▪ May 20, 2020: Shareholder group presents request of an EGM to the Board and proposes BoD does not want to enter into discussions under an NDA but to seek a compromise before going public publicly communicates the request on May 21 ▪ May 25, 2020: Telephone conference between shareholder group and Gary McGann to Gary McGann outright rejects Urs Jordi as Chairman and makes seek possibility for an alternative solution it clear that Board will not support more than 1-2 candidates ▪ May 26 – June 6, 2020: Several engagement attempts to find alternative solutions to EGM Board sticks to its previous rejection – treats BoD candidates as motions, accelerate the EGM and hold off any initiatives from the strategy review before formal group representatives. No willingness to hold EGM shareholders have an opportunity to vote on the new Board earlier (rather further delay announced on July 20th) ▪ July 15, 2020: Engagement attempt prior to distribution of EGM invitation Gary McGann: Confirms that EGM invitation will be sent out by July 20, and that he would only engage afterwards ▪ July 23, 2020: Invitation to participate in formal evaluation process received (3 days after EGM invitation with rejection of shareholder proposals was sent out on) Both meeting offers are ignored (meeting with candidates ▪ July 30, 2020: Shareholder group offers to (i) have a meeting with remaining BoD members as well as with shareholder group) and in particular Annette Flynn & (ii) BoD candidates to meet with nomination committee ▪ August 10, 2020: Telephone conference with Gary McGann & Jim Leighton (at the request Gary McGann firmly holds on to his very first offer from May 25, of shareholder group to seek alternative solutions) mentions that the Board will try to propose its own chairman candidate ▪ August 12, 2020: Shareholder group again offers a meeting to the BoD to discuss Gary McGann rejects any further meetings unless shareholder possibilities for alternative solutions group supports Andreas Schmid (otherwise no basis for discussion) 41 Arguments from the current Board are groundless and misleading
Arguments made by the current Board1 Why they are groundless and misleading «As a Board, we do not believe it is appropriate to ▪ Retiring Chairman rejected U. Jordi as chair in a call on May 25th – just 3 recommend the election of any candidates as Directors business days after submission of the proposal – without any inquiries nor of the Company absent an evaluation process […] a single interaction with U. Jordi (confirmed in writing on June 2nd) Absent such a process, the Board is not in a position to ▪ BoD always only considered to support a maximum of 1-2 candidates: satisfactorily assess the proposed candidates.» treating them as formal group representatives – ignoring their merits/skills ▪ Board candidates offered to have constructive meetings with nomination committee and remaining board members – offer was ignored by BoD ▪ Upfront rejection was not in line with internal policies showing lack of bona fide process ▪ Retiring Chairman was actively involved in proposal of its successor in breach of article 8 of the Terms of Reference of the Governance and Nomination Committee1
«The Shareholder Group is seeking to propose over 30% ▪ All 3 proposed candidates are independent of the membership of the Board with an equity ▪ Even if all proposals from the shareholder group are approved, they will only ownership interest of 20.01%» […] «would effectively account for 3 of the 9 future board members (no majority) give the Shareholder Group Board control» ▪ If elected; they will be supported by a majority of shareholders
«It is important to and in the best interests of the ▪ Current Chairman will resign unless he manages to announce a Company and all its stakeholders to provide continuity transaction (sale) prior to the EGM2 on the Board of Directors» ▪ If all shareholder group proposals are approved, there will be 6 existing members remaining on the board – little difference regarding “continuity” compared to BoD proposal
1. “The Chair of the Board shall not participate at a meeting of the Committee (or during the relevant part) at which the appointment of a successor to the Chair of the Board or performance evaluation of the Chair is being discussed.“ 2. According to the shareholder letter and EGM invitation from July 20th, 2020 42 Simplify Aryzta
Focus on the Core.
Reduce Risk.
Rebuild Trust.
43 VERAISON Capital AG, Löwenstrasse 58, CH-8001 Zurich, Telephone: +41 44 829 80 80, [email protected], www.veraison.ch