Feed the beast

Bid­vest needs new ac­qui­si­tions

Finweek English Edition - - Companies & markets - SHAUN HAR­RIS

BRIAN JOFFE, CE of the sprawl­ing (in terms of be­ing big and ev­ery­where) Bid­vest Group, was in a feisty mood when Fin­week spoke to him last Mon­day. With a strong set of in­terim re­sults un­der his belt, he prob­a­bly felt he could give a bit of stick to a jour­nal­ist who, in his opin­ion, wan­dered a bit off the path.

Co­mair, in which the group re­cently bought a 20% stake, was clearly not on the agenda when he had much big­ger things to talk about. “When we get the op­por­tu­nity to buy 20% of any com­pany that’s worth­while, we do it. We look at op­por­tu­ni­ties all the time. I don’t know why there’s all this fuss about Co­mair.”

Prob­a­bly be­cause air­lines are per­ceived, and prob­a­bly in­cor­rectly, to be glam­orous, ex­cit­ing busi­nesses. And Bid­vest is firmly on the pe­riph­ery of the air­line in­dus­try with its in­ter­ests in air­craft clean­ing ser­vices, cargo and run­ning the Pre­mier Class lounges at air­ports. It’s also in­volved in run­ning and up­grad­ing Mumbai In­ter­na­tional Air­port as part of a con­sor­tium. Does this mean there will one day be a Bid Air?

“There is, we have a num­ber of air­port re­lated ser­vices,” he snaps. That’s not what we meant though – we know about the rel­a­tively new Bidair Ser­vices di­vi­sion. Is Joffe go­ing to do a Richard Bran­son and buy or de­velop an air­line?

“Co­mair is just an in­vest­ment, an op­por­tu­nity we saw as en­trepreneurs. It’s go­ing to be held as an in­vest­ment.” Then we re­mind Joffe that the last time we spoke he said air­lines weren’t good busi­nesses. “I’m an en­tre­pre­neur, I can change my mind. But gen­er­ally speak­ing, I don’t be­lieve air­lines are good busi­nesses.” He con­firms how­ever that ser­vices like bag­gage han­dling are be­ing in­ves­ti­gated as op­por­tu­ni­ties. But not on­flight cater­ing – that would put Bid­vest in com­pe­ti­tion with clients.

Okay, that’s cleared up. We know Bid­vest is look­ing at a pos­si­ble, prob­a­bly large ac­qui­si­tion in food ser­vice over­seas, Europe or pos­si­bly the US, but no de­tails yet.

Food ser­vice in­ter­ests held by Bid­vest Europe are valu­able con­trib­u­tors to group rev­enue and prof­its, which are grow­ing strongly off a big wheel (rev­enue of R15bn in Europe, R48bn for the group in to­tal). But the land­mark 3663 First for Food­ser­vice in the UK took a bit of a hit, los­ing the con­tract for the Min­istry of Defence. Joffe says, how­ever, that new busi­ness has been brought in, in­clud­ing Hil­ton Ho­tels, KFC and Pizza Hut. “We’ve al­ready re­placed the vol­ume, though it’s not as prof­itable,” Joffe says.

In South Africa there are a few prob­lems, like the bak­ing di­vi­sion, but Joffe says it’s be­ing worked on, and Bid­vest re­mains com­mit­ted to the busi­ness. How­ever, as the group ex­pands at a rapid pace, main­tain­ing the high re­turns that Bid­vest is renowned for, seems to be caus­ing some strain.

“The group grows and you have to rein­vest in the group all the time, and it leads to a pe­riod of in­tro­spec­tion. Not so much about the busi­ness, but about man­ag­ing the as­sets. The broad view is that you put more as­sets in and re­turns are lower – it’s a sit­u­a­tion we don’t want to con­tinue.”

And that’s prob­a­bly the big­gest chal­lenge Joffe faces – find­ing the real qual­ity ac­qui­si­tion op­por­tu­ni­ties to feed into a group hun­gry for new busi­nesses. It’s also prob­a­bly why Bid­vest will in­creas­ingly look abroad for ac­qui­si­tion op­por­tu­ni­ties. The last great, large deal in South Africa was prob­a­bly McCarthy, the ve­hi­cle re­tailer now housed in Bid Auto (with Bud­get Rent a Car and Burch­more’s) that’s pump­ing out a fifth of group rev­enue.

Un­less Joffe looks at in­creas­ing his stake in Co­mair and in­tro­duc­ing… no, we’re not go­ing to get into that again.

McCarthy seems well placed, al­most per­versely placed in the cur­rent eco­nomic cli­mate. New ve­hi­cle sales are still ro­bust but slow­ing a bit due to in­creases in in­ter­est rates, and mar­gins are un­der pres­sure from com­pet­ing new ve­hi­cle pric­ing poli­cies and the used car mar­ket. But any swing

“I’m an en­tre­pre­neur, I can change my mind.”

to­wards used cars should ben­e­fit McCarthy, which has a strong pres­ence in this mar­ket. And for new car own­ers who overex­tended them­selves and had ve­hi­cles re­pos­sessed, well they get auc­tioned at Burch­more’s.

Look­ing ahead, Joffe sees many op­por­tu­ni­ties for Bid­vest in spend­ing on the in­fra­struc­ture projects lead­ing up to and be­yond 2010. Many group busi­nesses are well placed to ben­e­fit from this spend­ing, which Joffe feels has lagged and needs to catch up.

And he will con­tinue seek­ing out new op­por­tu­ni­ties. “We should have a good sec­ond half, the cur­rency con­ver­sion is very pos­i­tive for us. But, we live in very volatile times.”

That may just be a throw­away line, but we sus­pect Bid­vest has some big plans.

Get­ting in­tro­spec­tive. Brian Joffe

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