Market cheers for ‘new’ Clover
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.