Remgro to spend R805m for bigger stake in RCL Foods
Remgro, an investment heavyweight chaired by Johann Rupert, is willing to spend as much as R805m to raise its stake in consumer foods maker RCL Foods, a move that will give minority shareholders an easy payout in the highly illiquid stock.
RCL is among the most illiquid shares on the JSE with shares worth just 4.8% of market capitalisation of nearly R8bn being traded in the past 12 months, reflecting the investment conglomerate’s tight grip on the supplier of chicken to KFC, Nando’s and Chicken Licken.
But Remgro, which already holds 76.6% of RCL after picking up an additional 12% in November, said the acquisition of as many as 100-million shares for R8.05 each should not be construed as a takeover. It will start making bids until markets close on December 11.
“The Remgro bid is a mechanism to provide liquidity to the broader RCL shareholder grouping at a fixed price and should in no way be construed as a general or partial offer by Remgro to acquire the remaining voting securities in RCL,” Remgro said.
If successful, Remgro will increase its holding to about 83%. The R8.05 offer is a 2.4% discount to the R8.25 RCL closed at on Tuesday, having fallen more than a quarter in 2020.
RCL, the owner of brands such as Selati sugar, Ouma rusks and Rainbow Chickens, has been hit hard in 2020, due partially to the temporary closure of quick-service restaurants during the Covid-19 pandemic, as its customers include KFC and Nando’s.
The group reported a loss of R959m for its year to end-June, from a loss of R183.9m previously, amid R1.5bn in writedowns at its chicken business to reflect the economic pressure due to Covid-19.
RCL is also in the middle of a partial management shake-up and it was confirmed in a staff announcement in November that it had wooed three highly regarded executives from rival Country Bird Holdings (CBH) to lead a turnaround strategy at Rainbow.
According to an internal RCL announcement issued by CEO Miles Dally, Marthinus Stander (CEO of CBH), Fritz Grobbelaar (financial director of CBH) and Wouter de Wet (business improvement director of CBH) have been appointed to head RCL’s “new chicken business unit The trio will start in 2021 and will report to Dally.