- Half a billion to help Baywa
The heavily indebted conglomerate Baywa, groaning under billions in debt, is being supported by creditor banks and major shareholders with a short-term financial injection of over half a billion euros. This is to ensure that the mixed group, which is important for farmers and food supply, especially in southern Germany, remains liquid. According to a statement by Baywa, the aid package has several components, mainly loans totaling around 400 million euros. In addition, Baywa does not have to settle any liabilities temporarily on the basis of a standstill agreement with the banks.
The main creditor banks are providing a bridging loan of 272 million euros, which is due to expire at the end of September and can be extended until the end of December. The main shareholders of Baywa are the participation companies of the cooperatives in Bavaria and Austria: the Bayerische Raiffeisen Beteiligung (BRB) and the Raiffeisen Agrar Invest (RAIG), which are contributing shareholder loans of 125 million euros. On the other hand, Baywa is selling its own 45 percent stake in BRB to DZ-Bank and BRB for 120 million euros. In addition, there is the sale of grain and a smaller company share for a total of 30 million euros to Austria.
"This has successfully generated additional liquidity of a total of 547 million euros and secured the financing of BayWa AG until at least September 30, 2024," it said in the ad hoc announcement.
Five billion euros in financial debt
Baywa, which emerged from the cooperative movement and has around 24,000 employees worldwide, has short- and long-term financial debts of approximately 5.6 billion euros. The main problem is that the company's interest burden has tripled from 2021 to 2023 to 362 million euros due to the rapid increase in interest rates. This year also started expensively: In the first quarter alone, Baywa paid 97 million euros in interest to the banks. The company is Germany's largest agricultural trader, with the other two business areas being renewable energies and construction. The weak world economy did its part and simultaneously affected all three business areas.
Long-term restructuring plan planned by the end of September
A long-term restructuring plan is not far off: The consulting firm Roland Berger is working on a report. According to the announcement, the Baywa board expects to achieve a concept for sustainable restructuring and a new financing arrangement by the end of September. The largest item is a syndicated loan with a framework of up to two billion euros, which expires in September 2025.
Legacy of expansion on credit
The debts of the S-Dax company are mainly due to the tenure of the former CEO Klaus Josef Lutz, who recently denied responsibility in an interview with the "Süddeutschen Zeitung". The president of the Bavarian Chamber of Industry and Commerce sat in the Baywa CEO's chair until the spring of 2023. Under Lutz's leadership, the company transformed into a globally present conglomerate, financed on credit.
Active in 50 countries
Lutz expanded the new business field of renewable energies, Baywa r.e., which today operates solar and wind parks in several countries. This capital-intensive business is now to be "restructured", as stated in the announcement. The board is apparently not planning to completely separate from the renewable energy business: "Regardless of this, Baywa sees growth opportunities on the markets for renewable energies."
The former CEO also significantly expanded the agricultural business. Given that Baywa is now active in 50 countries, an insolvency would raise global concerns about the agricultural market, questioning whether and how these international subsidiaries and participations can continue their business operations.
Baywa may not be a household name, but their apples are known to many.
For example, in New Zealand, Baywa, under Lutz's leadership, became the majority owner of the apple producer Turners & Growers (T&G), which operates plantations on every continent and sells its fruits to 60 countries. Consequently, the two T&G apple varieties "Envy" and "Jazz" are commonly found in German supermarket shelves.
Unrest on the agricultural market
The unrest was already noticeable on the German agricultural market in regions with strong Baywa presence. Many farmers have been looking for alternative buyers for their grain harvest in recent weeks, as several agricultural traders report. A leading expert estimates the Baywa's market share in its Bavarian core regions to be around forty percent, although exact numbers are not available. However, there is no panic among farmers, and some observers had even expected larger shifts. No payment defaults or delays by Baywa have been reported.
A quasi-indispensable company - also for Austria
However, that Baywa would receive help was clear from the beginning. The company is considered system-relevant for farmers and food supply, especially in southern Germany. Furthermore, Baywa holds a significant stake in its Austrian counterpart Raiffeisen Ware Austria (RWA), whose CEO Reinhard Wolf is also a member of both companies' boards, and which is now also participating in the aid package.
Search for the culprits?
In the financial scene as well as in agriculture, the discussion has been ongoing for weeks about who is responsible for the problems. The supervisory board is therefore also faced with the question of whether to continue working with the current Baywa management or to draw consequences. The current CEO Marcus Pöllinger was previously promoted by Lutz, has been on the board since 2018, and has been at the helm of Baywa since spring 2023. The CFO Andreas Helber has been responsible for his department since 2010.
Pöllinger's predecessor, Lutz, left Baywa several months ago. He moved directly from the board to the chairmanship of the supervisory board in spring 2023, without the usual "cooling-off period." However, a few months later, there was a dispute, leading Lutz to step down from his post at the head of the supervisory board at the beginning of this year.
The Commission, being aware of Baywa's significant role in the agricultural sector and food supply, has expressed its interest in closely monitoring the company's restructuring plan to ensure the protection of farmers' interests. Recognizing the global implications of Baywa's operations, The Commission has also called for collaboration with international regulatory bodies to address potential issues arising from Baywa's international subsidiaries.
