Rem­gro’s RCL move strate­gic

Business Day - - FRONT PAGE - Siseko Njobeni njobe­[email protected]

Listed in­vest­ment hold­ings group Rem­gro could buy out mi­nori­ties in its op­er­at­ing sub­sidiary RCL Foods after the group bought about 7-mil­lion shares in the owner of Yum Yum, Se­lati and Nola brands.

Listed in­vest­ment hold­ings group Rem­gro could buy out mi­nori­ties in its op­er­at­ing sub­sidiary RCL Foods after the group bought about 7-mil­lion shares in the owner of Yum Yum, Se­lati and Nola brands in De­cem­ber 2018.

RCL Foods’ share price rose 12.4% in early trade on Thurs­day be­fore it re­treated, clos­ing 8.77% up at R15, the high­est in weeks.

The de­ci­sion to buy the shares in the open mar­ket could be a pre­cur­sor to Rem­gro’s buy­out of mi­nor­ity share­hold­ers in its listed op­er­at­ing sub­sidiary, says Bren­don Hub­bard, a port­fo­lio man­ager at Clu­casGray.

RCL, which has a mar­ket cap­i­tal­i­sa­tion of R13.6bn, is one of the largest pro­ces­sors and mar­keters of chicken in Africa, han­dling around 24-mil­lion chick­ens at any time at more than 180 farms coun­try­wide.

Hub­bard said on Thurs­day the move, which takes Rem­gro’s in­ter­est in RCL to about 78%, could be part of a broader strat­egy by Rem­gro to “clean up” its port­fo­lio of in­vest­ments, while be­ing on the look­out for at­trac­tive in­vest­ment op­tions.

“Food is a pri­or­ity area for them,” he said. He pointed to the R11.9bn deal in 2018, when Unilever ac­quired Rem­gro’s 25.75% in­ter­est in Unilever in ex­change for the Spreads busi­ness, as well as a cash con­sid­er­a­tion of R4.9bn. That put the value of the Spreads busi­ness at R7bn, which man­u­fac­tures and mar­kets well-known brands such as Rama, Flora and Stork.

REM­GRO MAY WANT TO CLEAN UP PORT­FO­LIO, WHILE ON THE LOOK­OUT FOR AT­TRAC­TIVE IN­VEST­MENT OP­TIONS

As at June 30 2018, the group, es­tab­lished in the 1940s by An­ton Ru­pert, had in­vest­ments in more than 30 com­pa­nies in the bank­ing, health-care, con­sumer prod­ucts, in­sur­ance, in­dus­trial, in­fra­struc­ture and me­dia sec­tors. Hub­bard said Rem­gro could buy out RCL mi­nori­ties and com­bine the man­u­fac­turer of food prod­ucts with the Spreads busi­ness. Rem­gro’s strat­egy could be to raise its stake be­fore mak­ing a bid.

Rem­gro did not re­spond to re­quests for com­ment on Thurs­day.

At the end of June 2018, RCL was SA’s lead­ing sugar pro­ducer, ac­count­ing for one third of out­put at 700,000 tons a year.

In the 2018 fi­nan­cial year, RCL’s con­tri­bu­tion to Rem­gro’s head­line earn­ings in­creased by 52.6% to R647m.

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