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FEEDING FRENZY

05 Apr KWV Holdings

FROM early year manoeuvres it seems like Stellenbosch investment giants Remgro (controlled by the Rupert family) and PSG (controlled by the Mouton family) are going to set the menu for the local food and liquor sector.

At the time of going to press there were several appetising developments underway.

Rainbow Chickens, controlled by Remgro, was putting the finishing touches to a massive capital raising exercise to fund its proposed acquisition of consumer brands giant FoodCorp.

The FoodCorp deal is seen as a definitive move by Rainbow to diversify away from the poultry sector, and effectively become Remgro’s thrust into consumer brands. Rainbow has also recently shown an inclination to expand directly into Africa after securing a equity partnership with the poultry wing of ZamBeef, a well known Zambian company.

On the drinks front, Distell, the Stellenbosch-based liquor conglomerate in which Remgro is the largest shareholder, had advised that it was in negotiations around a potential acquisition. Only hours after Distell gave notice of the pending deal, Zeder Investment, the agri-business investment arm of PSG, announced it had sold its effective holding in Capevin (which holds a chunk of Distell) to well known asset managers Allan Gray and Coronation.

Most observers believe Distell – which owns iconic wine brands like Fleur du Cap, Nederburg and Durbanville Hills as well as best selling cider brands like Savanna and Hunters – is hunting offshore for new operational assets.

Distell already earns a fair share of its keep in international markets, where its top of the range wines and its Amarula liqueur are big sellers.

A few dissenting voices believe Distell may be looking locally at KWV, owned by Cape-based empowerment company HCI, a likely target. CBN, however, does not believe HCI would consider selling the under-performing KWV at this juncture. In fact, HCI has recently increased its majority shareholding in KWV.

The next move by Zeder should be interesting. Zeder still retains a small 5.3% stake in Capevin (which holds a strategic stake in Distell as its only asset,) but the real story is that it has cashed in R700m worth of Capevin shares. That gives Zeder a serious war chest with which to seek out new opportunities.

Zeder invests mainly in food, beverage and agricultural companies, but it has reiterated that it prefers opportunities where the company can directly or indirectly add value.

Obviously Zeder could not add meaningful value at a Distell level, where Remgro and SABMiller are the major shareholders.

In outlining the rationale for selling off the bulk of its Capevin shares, a Zeder director said the proceeds would be utilised in “existing and/or new companies where Zeder can play a more meaningful role…”

Zeder has recently shown a penchant for African agribusiness opportunities, but could some consideration be given to upping its meaningful stake in Pioneer Foods (held mainly via unlisted Agri Voedsel?)

Pioneer – as its latest trading statement alludes – has been battling for traction outside its core stable foods (bread) and cereals (Bokomo) cluster.

Perhaps a bigger Zeder influence can induce some inspired corporate action…perhaps even the rationalising of the many third and fourth ranked brand categories that Pioneer competes in. Could new look Rainbow become a buyer for some of Pioneer’s brands outside its staple foods and cereals cluster? Who knows, maybe even the old Pioneer proposal to merge its Ceres Beverages with KWV could be revisited on terms that suit PSG/Zeder and HCI?

At the time of going to press, however, Zeder has shown an inclination to up its stake in Agri Voedsel’s corporate cousin, Kaap Agri, a retailer that serves mainly the farming community. Zeder, which already owns around 33% of Kaap Agri, has pitched a premium priced offer to buy an additional (but, so far, undefined) shareholding in the strong performing retailer.

Source: Cape Business News