Long4Life opts to acquire SA group

Brian Joffe’s firm could pay R734m for Chill Holdings

The Fitch and Leeds tonic water you may have used to top up your gin has been bought by Brian Joffe’s Long4Life. In a deal that may end up costing the recently listed company as much as R734m, Long4Life has agreed to buy Western Cape drinks group Chill Holdings.

The Fitch & Leedes tonic water you may have used to top up your gin has been bought by Brian Joffe’s Long4Life.

In a deal that may end up costing the recently listed company as much as R734m, Long4Life has agreed to buy Western Cape drinks group Chill Holdings from senior management, Africa Beverage Ventures and Raubenbel.

Chill makes, packs and distributes a range of drinks — including its own brands Score, Fitch & Leedes, Bashews and Country Club. It also bottles nonalcoholic and alcoholic drinks for companies such as Diageo, the global group that owns brands such as J&B, Tanqueray, Guinness and Smirnoff.

“This business has got to a point where it needs, I suppose, a bigger daddy,” said Long4Life CEO Brian Joffe.

“I think there’s an opportunity, certainly from the point of view of the seller, to participate and share with us in developing and consolidating their business. They’ve got some very good brands they want to expand into the rest of SA where they aren’t,” Joffe said.

Chill was founded in 2001 and posted earnings before interest, tax, depreciation and amortisation (ebitda) of R86m for the year ended June.

Long4Life’s ultimate purchase fee will be determined by what the company makes in ebitda for the 2018 financial year — and its minimum target is R120m — implying growth of more than 30% in earnings.

That would see Long4Life shell out R664m for the firm but this may be adjusted higher, to a maximum of R734m.

“A purchase consideration of seven times ebitda for a business that’s growing at 30% a year — that’s quite a reasonable price,” said Joffe.

MD Grant Hobbs, who joined Chill in 2005, would not be drawn on what the group expected to earn but said, “we do a rolling seven-year plan and we’re going hell for leather”.

Joffe said: “Obviously we’ve looked at what we think the business can potentially earn in the years to come and if we don’t get 20% compound growth out of the business, then we haven’t done a good deal, so we’re hoping we’ll get that.”

The sellers — Africa Beverage Ventures and Raubenbel — are private equity players who initiated an auction process.

“We didn’t want to sell but they needed to find someone to buy them out and we wanted to use that opportunity to find a strategic partner,” said Hobbs.

According to Joffe: “This is not a bargain, if you want to call it that. If you take its strategic position in the market, together with the brand names, I think we paid a reasonable price.”

Under the agreement, 75% of the purchase will be settled in cash and 25% through the issue of Long4Life shares, at R5.21 apiece.

Asked what he thought of working with the former Bidvest CEO, Hobbs said: “You can see why the guy leads businesses, he’s inspiring and he doesn’t put himself on a pedestal.”