Feb. 12 - Rob Cox and Robert Cyran discuss whether investors should get excited about Mexican breadmaker Grupo Bimbo’s $1.8 bln deal to buy Canada Bread.
So we're going to be talking about bread lots of bread Mexican bread Canadian bred. We got to deal today one point eight billion dollar deal Grupo bimbo the best named company in North America if a moral. Went out for an and is buying Canada bread the worst named company -- there's some interesting arbitrage going on here yeah I would think not not just our -- in the name -- -- and science terms because. Bimbo mean every expert about the Mexican stock market it's right up quite a bit of -- and doubled in the past years. And bimbos Ghana and acquired a lot of companies -- partly clearly is stuff I tried to bite hostess at but. Bunch of stuff right yeah and in North American bakery and the reason it's doing is because -- trade that pretty nice multiple 26 times earnings. Six cents earnings for bread operating company because it's an emerging market where people creating one program and that they they get when -- -- round. They go to Canada and this -- -- companies it is still on the ground for five years. They can by the company intuit acquisition premium about twenty times earnings so what that what that does as investors like -- 30% you know that they're basically they trade 30%. -- -- -- Premium gets to the act but of course also buying. Okay it may be slow growth but it's probably pretty steady. The fact you almost wonder why they were able to get this rather than private equity guy but but that's because the price has. But the but the other point you then of course diversify into stable -- -- develop. Cassie your your weighted average cost capital was it about -- does have. Quite a few crises over the past bright -- twenty years that some expenses and other acquisitive company got troubles and so far. In this case however if they stay in business. It's not taking the debt hasn't grown hugely mountain for some accident that I think that it just hasn't sent actually spread the -- spanning across north now. America the North American Free Trade Agreement -- makes it easier and you're getting a few probably getting no other financing and yet there any synergies that just created top right here maybe they can get some. Introduce a Mexican Britain Canada you know convinced that he -- or something or maybe they start exporting from across the border. OK well thank you very much we'll look for your story will be back -- more breaking news tomorrow.