Hoogwegt Group: “When Orchard is on board, you know you are in control of the process”

If anyone has extensive experience with Orchard, it’s Herco Boer. Having held  top financial positions at various companies, he has been collaborating with Orchard since 2005. Currently, in his role as CFO at Hoogwegt Group, the world’s largest family-owned dairy company, he shares insights in a conversation with Orchard’s Rolf Michon.

“The first time our paths crossed, I was working at Friesland Foods: the predecessor of FrieslandCampina,” Herco recalls. “There, I was responsible for the division dealing with contracts between the cooperative and member farmers. All those thousands of farmers had large stainless steel cooling tanks for milk in their yards, which they rented from the cooperative. Friesland Foods wanted to get rid of that property in 2005, because they were negatively impacting return on capital. For this disinvestment, I then enlisted Orchard’s help.”

Milk cooling tanks off the books 

Rolf adds: “I remember it vividly. While specialised divestment advisory may not have been our core activity, looking closely at a business case, calculating scenarios, selecting market parties, planning the process and steering for results were core competences even then. It doesn’t really matter whether it’s a disinvestment, financing or acquisition. Moreover, in this situation too, we had a bank to convince as the interested buyer had substantial bank financing and thus needed clarity on the exact value of the cooling tanks.” Herco: “Together with Orchard, we successfully sold the milk cooling tanks and got them off the books, while the farmers could still use them.”

“The solution was so clear, I was able to convince everyone.”

Locked in an office full of binders

“After a brief stint at DHL, I continued my career as CFO at supermarket cooperation Coop,” Herco continues. “Around 2009, that was a relatively small chain with big ambitions. At that time, it was a dog-eat-dog world in food retail. Our growth strategy and balance sheet size called for refinancing. The first person I called then was Rolf.” “At the time, I had Herco lock me up for a morning in an office full of files with bank documents.” Herco: “Analytical and critical as he is, he then came out with a well thought-out memo: a few A4s full of advice on what to do and who to approach. Impressive, because with our terms and objectives we did not make it easy for him.”

Definitely not a banking club deal

Rolf agrees, “Herco had made it clear to me that Coop wanted more financial leeway and flexibility for acquisition opportunities. But he also said that Coop was definitely not looking for that financing in the form of a club deal with one of the banks involved as an agent: they had less favorable experiences with that.” Herco: “Moreover, I was looking for a transparent structure. One that I could easily explain to our supermarket entrepreneurs and board members. We got exactly what we wanted. Orchard helped us get a structure with the characteristics of a club deal, but with the advantages of bilateral agreements. All that during the economic crisis, when banks really preferred the security of a club deal. The solution was so sound and clear that I was able to convince everyone internally with a few slides.”

Very sharp negotiators

“Based on this structure, we successfully refinanced with Orchard about five times,” Herco continues. “This enabled Coop to take over a total of about 50 branches from competitors and eventually, with Jumbo, even the supermarket chain EMTÉ. Orchard’s solution has more than proved itself. In my experience, banks clearly do not always appreciate it when a third party is involved in refinancing processes. However, Orchard always has more market knowledge than a CFO and also knows what information is not in the annual reports, making them very sharp negotiators. If, like me at the time at Coop, you have a small financial staff and no treasurer, it is really important in these processes to lean on the knowledge and experience of third parties.”

“I felt with every collaboration that my goals became their goals.”

Over hurdles and through hoops

Rolf responds, “The client’s goal determines our role and relationship in negotiations. Sometimes, at the table, you are the street fighter, other times you are the referee. The objective comes first. Sometimes banks do find us difficult to deal with, but that is part of the game. And, in the end, banks are usually mostly happy because we take a lot of work off their hands.” Herco, nodding: “When Orchard is on board, we, but also the banks, know that everything is correct. Everything has been well thought through, the paperwork is in order, the timing is realistic and there are no surprises. Banks just love it when everything meets their demands and their internal process goes smoothly by consequence.”

Helping with risk management 

“As CFO at Hoogwegt, I face interesting financial issues again,” Herco states. “We are a global player in dairy products with an annual turnover of 3.5 billion euros. This makes us one of the top ten Dutch family businesses. Fortunately, I can lean on a treasurer here, who plays a key role in the financial arrangements with six banks and our eight international offices. Strikingly enough, that treasurer comes from Orchard. That doesn’t mean we no longer need Orchard, quite the contrary.” Rolf: “We help Hoogwegt with risk management, amongst other things. Because Hoogwegt operates internationally, there are, for instance, currency risks and risks of investments that play out differently in different countries. With key figures and models, we minimise those risks. We also advise on how best to account for everything.”

“When we tackle an issue together or sit at the negotiating table, I feel like a colleague as well as an advisor.”

Continuing late into the night

“So our paths have crossed since 2005,” Herco summarises. “You can safely call that an enduring relationship. I don’t even need to explain that this cooperation is based on mutual trust and open communication. In terms of integrity and ethics, too, Orchard hasn’t let me down for a second in all these years. And, no matter which organisation I worked for, Orchard always surprised me with its vast knowledge of the sector. I also felt strongly with every collaboration that my goals became their goals. They are the partner that works deep into the night when it matters.” Rolf concludes: “When we tackle an issue together or sit at the negotiating table, I feel like a colleague as well as an advisor. Exactly that gives me the pleasure of aiming for the maximum result.”