Swiss company Hochdorf has reached an agreement to divest its infant formula and dairy ingredients division to AS Equity Partners, an investment firm. The transaction aims to secure the operational business and retain current employees after the deal is finalized, which is projected to occur before the year’s end, pending shareholder approval during a meeting on September 18.
Hochdorf Swiss Nutrition (HSN), the manufacturing subsidiary of Hochdorf Holding, will remain under the leadership of CEO Ralph Siegl and the existing management team. HSN was placed on the market earlier this year following a comprehensive review of the struggling business prompted by significant operational challenges.
The agreement with AS Equity, which operates from London and Zurich, is valued at an enterprise price of SFr83 million ($97.7 million). However, Hochdorf will only realize SFr15.5 million after settling a syndicated loan valued at SFr67 million, effectively transferring the debt burden to AS Equity.
Hochdorf Holding encompasses the Hochdorf Group, which consists of the infant nutrition and dairy food solutions units. These divisions were consolidated into HSN in 2015. The Swiss group stated, “In attempting to secure the operational business and to preserve related jobs, and having carefully considered various alternatives, a sale of the subsidiary HSN proved to be the only viable option.”
Despite achieving a cash-positive business result in 2023, Hochdorf acknowledged the ongoing financial challenges at the Group level. A strategic review initiated in 2019 had already led to the divestment of its controlling interest in the baby food subsidiary Pharmalys, along with exits from various other sectors including cooking oils and cereals.
Siegl noted, “During the intensive exploratory talks, AS Equity Partners expressed great interest in HSN’s potential and acknowledged the strategic direction of our transformation process in recent years.” The focus will be on expanding HSN’s business activities, particularly in infant nutrition, with an emphasis on maintaining its quality and enhancing profitability sustainably.
Currently, Hochdorf Holding has applied for a provisional debt restructuring moratorium, which has been approved by the relevant court. Upcoming shareholder discussions will likely address a renaming of Hochdorf Holding and the potential delisting of its shares, although HSN will remain unaffected by the debt restructuring.
The proceeds from the sale of HSN will not adequately address the significant legacy debt, including a hybrid bond valued at SFr125 million issued in 2017. Notably, Hochdorf Holding will have to write off SFr182 million in inter-company loans to HSN as of June 30, 2024, reflecting its over-indebtedness.
Andreas Schulte, founder and managing partner of AS Equity, emphasized the opportunity presented by Hochdorf Swiss Nutrition’s capabilities, stating, “The technological expertise of Hochdorf Swiss Nutrition, its relevance in modern nutrition and the encouraging trend in operational recovery are a compelling basis for us to tap into this interesting international potential.” The company looks forward to building upon Hochdorf’s long-standing tradition of 129 years.
Furthermore, the group has realigned its expectations following the impending deal, as demonstrated by the recent release of first-half financial results. While total revenue decreased by 5.5% to SFr145.7 million and infant nutrition sales plummeted by 23.2% to SFr38.9 million, ingredient sales saw a modest rise of 3.3%, reaching SFr196.8 million. Despite these figures, Hochdorf reported a net loss of SFr141.5 million due to substantial impairment losses tied to the planned sale of HSN.
The food and beverage industry continues to navigate changing consumer trends, and Hochdorf’s move reflects broader shifts within the food and drink business as companies adapt to evolving market demands.
