The heavily indebted Baywa AG is set to part ways with its financially troubled subsidiary, Baywa r.e. Originally envisioned as a growth opportunity, the company is now slated for sale or transfer to a “transformation shareholder.”
Details about the future ownership structure will be communicated “within a few weeks,” as indicated in an email from Hans-Joachim Ziems, the chief restructuring officer of Baywa r.e., to the company’s leadership. Baywa r.e. has been a joint venture between its parent company, Baywa AG, and the Swiss investor EIP. “This will allow us to accelerate our transformation independently,” writes Ziems.
Swift Separation as a Better Path
However, the terminology used by both the parent and subsidiary has not been uniform. The announcement from Baywa AG discussed the transfer of r.e. shares to the new shareholder, while the message from the r.e. board referred to this as a sale. Regardless, both parties seemingly agree that separate paths would be more beneficial. For Baywa AG, a rapid separation holds the advantage of removing the green energy company and its liabilities from its balance sheet. Together with creditor banks and major shareholders, the Baywa board reached a preliminary agreement on a new restructuring plan after months of discussions. According to the parent company, the troubles faced by Baywa r.e. were the reason the previous restructuring plan could no longer be sustained.
“It’s encouraging that an agreement has been reached,” commented Stefan Müller, president of the Bavaria Cooperative Association (GVB). The GVB represents Bavarian cooperative and savings banks that are the largest shareholders of Baywa through their investment company BRB. Emerging from the cooperative movement, Baywa plays a significant role in agriculture and food supply, especially in southern and eastern Germany. “The preservation of Baywa, as an important partner in Bavarian agriculture and construction, is of central interest to Bavaria,” stated Economic Minister Hubert Aiwanger from the Free Voters party.
Sale of Baywa r.e. Expected to Yield Less than Anticipated
Both the restructuring of Baywa AG and Baywa r.e. are now expected to take two additional years to complete, extending the timeline originally set for 2030. The r.e. was initially expected to sell for a hoped-for price of €1.7 billion, but its management significantly lowered revenue goals in the spring and extended the restructuring timeline. This, in turn, forced Baywa AG to reevaluate its restructuring plan. The Baywa board now estimates that selling its r.e. stake might yield only €900 million. However, both Baywa AG and EIP have agreed to forgo outstanding claims against Baywa r.e., as indicated in Ziems’ email.
Disappointed Hopes
Baywa entered the renewable energy sector in 2009 under the leadership of its former CEO Klaus Josef Lutz, with high expectations. The development and operation of solar and wind parks were supposed to provide a second revenue stream for the company, which had largely focused on agricultural trade until then. However, by 2023 and 2024, both Baywa AG and its subsidiary were simultaneously facing significant challenges. The parent company struggled to manage interest costs associated with over €5 billion in financial debt accumulated during Lutz’s internationally funded expansion. Baywa r.e. also built its business on borrowed funds and was adversely affected by U.S. policy; for instance, President Donald Trump’s cuts to subsidies for renewable energy expansion negatively impacted r.e.’s outlook. The r.e. board, however, anticipates that the company could record an operational profit as early as next year.
Baywa Plans to Withdraw from Heating Oil and Pellets
The parent company, Baywa AG, intends to withdraw completely from the energy business in the coming years. A new aspect of the revised restructuring plan indicates that the heating and mobility segment will be sold by 2029. This includes various disparate businesses ranging from heating oil and wood pellet sales to the construction of charging stations. If the restructuring progresses as planned, the once-promised international expansion initiated by Lutz will be fully unwound, leaving Baywa largely focused within Germany.
“A clear focus on agricultural trade, agricultural technology, and building materials,” stated GVB president Müller. “This business model has sustained Baywa for decades and can be profitably led into the future.” By the end of 2023, the group employed over 23,000 people worldwide, though the original restructuring plan projected that this number would shrink to approximately 8,000.
dpa
