Weston goes on the hunt for bargains

While most companies shear spending, George Weston Ltd. is going on a shopping spree. It can afford to. The country’s largest food merchant is flush with cash after its $465-million October spinoff of Neilson Dairy and last week’s $2.5-billion sale of its U.S. fresh bakery division. Weston now has $5 billion to go bargain hunting with, CEO Galen Weston told analysts in a conference call last week. As for details, he was coy, teasing that they could spend “in bits,” on one big deal or even on a joint deal—adding as a joke the proviso they weren’t looking in the steel sector.

Industry watchers expect the company to augment its core businesses of baked goods and/or food retailing. It already dominates the frozen baked goods sector in Canada, says one, so expanding its U.S. division, Maplehurst Bakeries, would make sense. On the supermarket side, Safeway Canada and Jimmy Pattison’s Overwaitea Food Group are viewed as prospects, though Weston’s 62 per cent interest in Loblaw Companies, Canada’s dominant chain, would trigger Competition Bureau hurdles. There’s also talk of it purchasing a luxury goods purveyor, given the Weston family’s track record as owners of Canada’s Holt Renfrew and Selfridges in the U.K. One Bay Street analyst is doubtful: “They like to be number one in every category; to buy a number one player in the luxury category is big dollars, even if it’s distressed.”

Weston’s apparent zeal to buy something new puts on the back burner recent speculation that George Weston would take itself private or buy out the Loblaw Cos. stake it doesn’t own (that speculation caused Loblaw’s stock to shoot up by almost 10 per cent). Of the two prospects, the privatization of George Weston would be more likely, Scotia Capital analyst Ryan Balgopal wrote last week.

In the meantime, the billionaire is acting like a kid in a candy store about the prospective bargains out there. “We never had $5 billion to spend before,” he said. “He seemed giddy,” reports an analyst. In the current buyers’ market, it’s a totally rational response.