The Successful Investor Hotline – Friday, October 25, 2013

Article Excerpt

MAPLE LEAF FOODS INC., $15.98, Toronto symbol MFI, rose 20% this week after the company announced that it plans to sell all of part of its 90.0% stake in Canada Bread (see below). Canada Bread is Canada’s second-largest producer of fresh and frozen baked goods, after Weston Bakery. It also makes pastas and sauces. Canada Bread supplies around a third of Maple Leaf’s sales. Maple Leaf’s stake in this business—currently worth $1.6 billion—is equal to 73% of Maple Leaf’s $2.2-billion market cap. The company would use the proceeds to fund a major restructuring of its meat-processing operations. This includes building new plants and eliminating unprofitable products. It’s also installing a new computer system that will give its managers more timely information. In addition, the cash would help Maple Leaf pay down its long-term debt of $1.3 billion. The two companies share some facilities, so separating them could pose a problem. Even so, Canada Bread’s strong brands and high market share should attract…