Plans by frozen bakery giant Aryzta to raise €800m are being challenged by its largest shareholder.

Aryzta announced in August that it had reviewed its capital structure and was approaching shareholders with a view to raising €800m to reduce debt. The move followed a profit warning in May and the announcement of plans to reduce costs over the next three years.

Cobas Asset Management, which holds a 14.5% stake in Aryzta, has now called for an extraordinary general meeting to present its own proposal to shareholders.

The €800m funding increase is too high, said Cobas, which has suggested a €400m capital increase and sales of non-core assets to raise a further €250m. It claimed its alternative significantly improved the outlook for shareholders in the medium term in comparison to the €800m plan.

Cobas said it endorsed measures to strengthen the balance sheet to enable Aryzta to add value to the business.

“However,” added the shareholder. “Cobas cannot defend actions that lead to such destruction of shareholder value as would occur through the highly dilutive capital increase proposed by Aryzta’s board of directors.

Cobas said, as a result, it is would vote against the board’s proposal at the Aryzta AGM on 1 November.

In response, Aryzta has said it will look at the request and proposal, and publish its position and the date of the extraordinary general meeting in due course.

“As previously communicated, the board of directors has proposed a fully underwritten capital raise of €800m for approval by shareholders at the AGM,” stated Aryzta, adding there would be no change to the date of the AGM or the agenda items to be considered at that meeting.

Earlier this month, Aryzta reported a drop in profit and earnings – but insisted it was well placed for future growth. Announcing its results for the year to 31 July 2018, the business reported a 9.5% fall in revenue to €3,435m (£3,057m), down 1.2% on an organic basis.