Another big African investment for Tiger Brands

South Africa’s largest food company, Tiger Brands, will buy local spice and beverage maker Davita Trading for R1.34-billion as part of its strategy to expand its footprint in Africa.

Peter Matlare, the chief executive of Tiger Brands, said: “The acquisition of Davita is an important step forward in Tiger Brands’ strategy to broaden our geographic footprint in emerging markets.”

In terms of the deal Tiger Brands will acquire the entire issued share capital of Davita Trading. The purchase price is based on an enterprise value of R1.6bn and will be settled in cash.

Matlare said the acquisition would support the group’s strategy of progressively building its sales and marketing infrastructure to service the African continent.

This has resulted in strengthened regional sales and marketing representation across large parts of the continent, enabling the company to increase brand awareness and improve product activation for new products and markets.

“We are excited about the possibilities that this acquisition creates.”

Ron Klipin, a portfolio manager at SA Stockbrokers, said Tiger Brands was a very mature company in South Africa and its growth could now only be elsewhere in Africa.

The group has made a number of acquisitions in the last year-and-a-half as part of its plan to widen its geographical exposure. This includes an agreement with the East African Group of Companies of Ethiopia to form a new joint venture that will make home and personal care products, biscuits, flour and pasta products for the Ethiopian market.

It also bought Deli Foods Nigeria, which makes biscuits for the Nigerian market.

The deal with Davita, which makes powdered seasonings and beverages, would also broaden Tiger Brands portfolio of products, said Klipin.

Previously the group said that the acquisition in 2009 of Crosse & Blackwell mayonnaise from Nestle was in line with its strategy of expanding into other categories with well-established brands.

Davita is a local manufacturer of powdered seasonings and beverage products with a presence in 28 countries in Africa and the Middle East. Its brands are Davita (premium powdered beverages), Jolly Jus (mass market powdered beverage offerings) and Benny (powdered seasonings).

Davita’s annual turnover in the year to February 2010 was R567 million, of which the bulk was from exports. The value of the net assets of Davita was R505.8m before deducting the value of interest-bearing shareholder loans due of R367.7m.

Davita will be retained as a self-standing entity within the Tiger Brands group.

Tiger Brands shares lost 1.42 percent to close at R180.28.

Soiurce: Business Report