Clover share price surges after talks of full acquisition announced
CLOVER Industries’ share price surged by more than 19 percent on Friday after the group announced that it had entered into talks with a third party with the intention of acquiring the entire issued share capital of the dairy company.
The share price climbed to a onemonth high of R16.80 on Friday after the announcement, up from Thursday’s closing price of R14.10.
Ron Klipin, a senior analyst at Cratos Capital, said it was difficult at this stage to predict which company or companies might be interested to buy Clover.
“I think the likes of Tiger Brands might be interested, but it is highly unlikely as Tiger Brands has been facing its own problems and they are very different companies. Zeder, which has been dependent on Pioneer Foods, might also come to the picture as Pioneer Foods has not been doing well lately,” Klipin said. He added that it could be one of the private equity funds or any other big food producers.
“Whoever buys Clover at this moment could prove it to be a good buy, as it provides good value and the share is reasonable, with just more than R3 billion in market capitalisation. Clover has also reinvented itself in the last three to five years and moved away from being a company that solely produced milk to become a competitive branded consumer goods and products group that has added products like yoghurt, juice and other good value adds into its portfolio,” Klipin said.
At the beginning of last year, Clover announced a restructuring meant to put into practice its objectives of developing higher margin value-added products in its dairy and related food categories, and eliminating its exposure to the future cyclicality of its low margin businesses, primarily raw milk.
The group formed an independent “special purpose vehicle”, Dairy Farmers of South Africa (DFSA), which would source raw milk directly from Clover’s existing milk suppliers.
Clover owns 26 percent of DFSA.