Not ex­actly flavour of the month

Mawere’s group must find new profit sauce

Finweek English Edition - - Companies & Markets - MARC HASENFUSS march@fin­

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 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.

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