Investor might be circling Pioneer Foods — analysts

Pioneer Foods, which owns brands such as Weet-Bix, Liqui Fruit and Sasko, may be on the radar of an investor wanting to take advantage of the decline in its share price, say analysts.

The food producer issued a cautionary announcement on Monday morning advising shareholders it had entered into negotiations that might materially affect its share price.

This was followed by a cautionary by Pioneer Foods’s biggest shareholder, Zeder Investments, which owns a 27% interest in the firm, prompting questions about whether the negotiations referred to were linked to this stake.

But independent analyst Anthony Clark said if Zeder is considering offloading its interest in Pioneer, it would have made its announcement first.

He said the negotiations Pioneer referred to were probably with a third party and any deal was likely to be significant.

Given that Pioneer’s market capitalisation is R15.5bn and that the JSE’s minimum threshold for the issue of a cautionary is a bid for 10% of a company’s shares, the transaction is likely to be over R1.5bn, said Clark.

Clark said he understood that the Stellenbosch-based PSG Group, which is controlled by the Mouton family, had sent out an internal memo a month ago saying Pioneer Foods was trading under a cautionary.

PSG Group, which owns 48.8% of Zeder, would not confirm this when asked.

Damon Buss, equity analyst at Electus Fund Managers, also said it was most likely that PSG was involved. “The more likely possibility, in our view, is that PSG is trying to unlock the value trapped within Zeder. Zeder’s share price discount to its [net asset value] is more than 30%, which is very wide,” he said.

He said one way to narrow that discount would be to unbundle the company’s stake in Pioneer to shareholders.

Buss said another possibility is that the company that has expressed interest is the same group that made an overture to the food producer two years ago. In March 2017, Pioneer released a cautionary saying it had been approached by a party to “explore a material transaction”. It later withdrew the announcement, saying the party had discontinued negotiations due to the downgrade of SA’s sovereign debt rating.

Buss said perhaps that party felt now was a good time to make its move as Pioneer’s share price has lost 38% of its value in the past year. At R70, it is now down 62% from its peak of R188 early in 2017.

There is also a possibility that Pioneer has decided to act on its plan to grow its branded fastmoving consumer goods side of the business to reduce reliance on commodity products such as its maize meal brand White Star.