Remgro’s RCL move strategic
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.