Mar­ket cheers for ‘new’ Clover

The Star Early Edition - - COMPANIES - Sandile Mchunu

FOOD and bev­er­ages group Clover In­dus­tries saw its share price gain­ing al­most 3 per­cent on the JSE after it an­nounced the com­ple­tion of its re­struc­tur­ing process.

The group first an­nounced its strat­egy to re­struc­ture in De­cem­ber 2016 in a move that was de­scribed by the pre­vi­ous chief ex­ec­u­tive, Jo­hann Vorster, as de­vel­op­ing higher mar­gin, value-added prod­ucts in dairy and other re­lated food cat­e­gories and to elim­i­nate its ex­po­sure to the cycli­cal­ity of its low-mar­gin busi­ness in fu­ture.

Ac­cord­ing to Clover, the re­struc­tur­ing would al­low its milk pro­duc­ers to pur­sue a vol­ume growth strat­egy through a newly formed spe­cial pur­pose ve­hi­cle, Dairy Farm­ers of South Africa (DFSA).

The share price opened lower, but by the af­ter­noon it traded higher at R17.39 a share, beat­ing Wed­nes­day’s clos­ing price of R16.99. How­ever, by the end of the day it closed at R17.19.

Clover said milk pro­duc­ers had been is­sued with B shares in DFSA and this rep­re­sents 74 per­cent of vot­ing rights of DFSA.

In re­turn Clover holds all the A shares which con­sti­tute 26 per­cent of the vot­ing rights of DFSA.

With the new re­struc­tur­ing DFSA would be­come the pre­ferred sup­plier of all raw milk re­quire­ments to Clover. It is ex­pected that DFSA will sell and ad­min­is­ter all the low-mar­gin fresh milk, ul­tra-high tem­per­a­ture milk, and ul­tra-pas­teurised milk di­rectly to the trade and con­sumers un­der the Clover brand and other se­lected brands in terms of a li­cence agree­ment con­cluded be­tween Clover and DFSA.

“The board of di­rec­tors of Clover is pleased to an­nounce that the is­sue and allotment of the B shares in DFSA to the milk pro­duc­ers has been im­ple­mented with ef­fect from July 1, 2017,” Clover said.

The board of DFSA, which con­sti­tutes nine mem­bers, has also been formed. It in­cludes chief ex­ec­u­tive Louis Jac­ques Botha and in­de­pen­dent non-ex­ec­u­tive di­rec­tor and chair­per­son Dirk Jo­hannes Reyneke. Clover said mak­ing DFSA an in­de­pen­dent com­pany would al­low the raw milk price to be de­ter­mined by a dif­fer­ent party and not Clover.

FNB se­nior agri­cul­tural econ­o­mist Paul Makube said it was com­mon in the milk in­dus­try that big play­ers such as Clover nor­mally ab­sorb small busi­nesses into their op­er­a­tions.

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