Not exactly flavour of the month
Mawere’s group must find new profit sauce
SHAREHOLDERS IN CONDIMENTS maker All Joy didn’t exactly fall over each other to participate in a R15m rights offer. Fewer than 2m shares were subscribed for in a rights issue that offered around 60m new All Joy shares at 25c/share. Underwriter African Heritage Investments (AHI) took up the bulk of the rights (just more than 58m shares). AHI is an investment group headed by Mutumwa Mawere, a Zimbabwean-born businessman.
Mawere came to prominence in South Africa’s investment circles when he bought a large stake in pharmaceutical group Forim/Alliance – companies which have since delisted from the JSE. Mawere, who has taken SA citizenship, also made headlines a few years ago when he fell foul of Zimbabwean President Robert Mugabe.
AHI will hold almost 57% of All Joy and, hopefully, guide the struggling group into more viable spheres of the food business by adding new operating assets to the mix. While All Joy’s mainstay tomato sauce businesses have managed to secure shelf space in supermarket chains, the group has battled to produce convincing cash flows over the years. In the six months to end-December 2007 All Joy posted a R1m loss as costs wiped out turnover of R30m.
While the recent rights offer funds will reinforce All Joy’s balance sheet, it does seem the group might still lack the capacity to acquire substantial assets that will diversify its operating base away from tomato-based products.
Earlier this year Mawere told Fin24.com that AHI intended bulking up All Joy with unspecified food assets. Presumably, that will require AHI (which appears to hold no food assets itself) to source acquisition targets and needs to convince vendors to take All Joy paper in settlement.
It would seem that AHI is the partner the controlling shareholders – pre-rights issue – wanted to rebuild value at All Joy. But All Joy CEO Marci Pather refers to a beneficial relationship with a new parent to explore “emerging investment opportunities” in the food sector.
Finweek reckons a short-term payoff will be required to smooth any notions that perhaps an unsolicited R13,8m takeover bid for All Joy may not have been such a bad alternative. In April, Eastern Trading’s buyout offer price – which equated to around 33c/share in shareholders’ hands – was deemed unacceptable.