HOPING FOR A FEW MORE BIG INVESTORS
There are certain boxes that need to be ticked before big spenders will follow the example of Pepsico’s R24.4bn bid for Pioneer Foods, writes Nigel Dunn
ining counters aside — and particularly the precious metal counters — the JSE has had a pretty dismal time since the euphoric days of “Ramaphoria” 18 months ago.
Investors soon realised there was no quick fix to the damage the “lost decade” had wrought on the economy and its finances. A lack of bold initiatives from President Cyril Ramaphosa and factional infighting in the ANC have not helped. It was thus with some surprise that one read of Pepsico’s R24.4bn bid for Pioneer Foods (PFG) late last month — a 56% premium to the last traded price of PFG ahead of deal speculation.
Value investors were quick to chalk up a victory, as were supporters of the president, the latter citing this as “clear evidence” of confidence returning to the country under his administration. The cynical might dismiss the former as premature and trite.
First we need the local economy and broader region to start to grow meaningfully and sustainably, with a concomitant increase in company earnings. To date there is little evidence
Mof life in either the SA economy or the region, with immediate prospects not looking good. While the Pepsico investment is to be welcomed, further meaningful investment is needed before chalking up one deal as a triumph.
As things stand, there is one irrefutable fact — historically, SA Inc assets are as cheap as they have been in at least a decade.
But there is a caveat. Is SA a structural or cyclical problem? If the former, cheap may become cheaper — if the latter, then Syd Vianello, a shrewd independent analyst, may well be right when he said recently: “Don’t be surprised if more clever foreigners buy SA assets on the cheap.”
IM has heard via scuttlebutt
that there may be further deals being considered. Assuming the rumour mill is correct, IM felt an article speculating on some possible deals would be of interest, and forge some healthy debate in the investment community.
Before allowing the mind to wander, a brief look at the PFG deal might be instructive and allow one to narrow the field of possibilities. Zeder holds a 27% stake in PFG; a large anchor shareholder makes an acquirer’s life easier. Second, PFG has strong brands — Weet-bix and Ceres, to name but two. Third, Pepsico views the deal as one of growth, providing it with a base from which it can expand into Sub-saharan Africa. Finally, the investment is in a “necessity industry” — food.