Selati Sugar

Sweet deal for RCL Foods as it acquires TSB Sugar

RCL Foods has announced it will acquire TSB Sugar as the former Rainbow Chicken evolves to become a multibillion-rand diversified food company spanning the sub-Saharan African region.

The R4 billion acquisition will see the Selati sugar brand forming part of RCL’s recently expanded portfolio, which includes Yum Yum peanut butter, Nola mayonnaise and Rainbow Chicken and Farmer Brown products.

“Following the acquisition of Foodcorp in April and our joint venture in Zambia with Zambeef formed last year, this acquisition continues RCL Foods’ ambition of building a diversified food business of scale in sub-Saharan Africa with compelling brands that deliver to consumer and customer needs,” chief executive Miles Dally said.

On the completion of the TSB Sugar acquisition, the equity value of RCL Foods will be approximately R15-billion.

RCL Foods will acquire the company from Remgro, which owns 100 percent indirectly.

The company added that the rationale behind the deal was to create a more broadly diversified revenue stream; to harness selling, distribution and credit management synergies; and to establish an attractive and a well capitalised agri-foods business.

It said the transaction would incorporate two black economic empowerment (BEE) deals, including one that TSB Sugar was in the process of implementing and a second one that related to the unwinding of RCL Foods current structure to a new one.

According to RCL Foods’ announcement, TSB’s BEE transaction will benefit the family trust of ANC national executive committee member, Mathews Phosa, who is currently a director of TSB. Under the BEE deal, about 7 million new shares will be issued, which according to Moneyweb are worth R126 million, to a special purpose vehicle established for the benefit of the MTM Family Trust.

Phosa was described as a “key participant in driving TSB’s strategic initiatives”.

“This provides a unique opportunity for RCL Foods to diversify across the food industry value chain, as well as to allow Remgro, the group’s major shareholder, the ability to restructure its various food interests under a single platform,” Dally said.

Commenting on the deal, Abri Du Plessis, a fund manager at Gryphon Asset Management, said it was clear that RCL Foods was on the path to becoming a huge food manufacturing company.

“It looks like they are creating a food company and it is also going be more of a primary food producer rather than the likes of Tiger Brands, which focuses on the end-products and building brands. It will compete more with companies such as Pioneer Foods,” he said.

Last year RCL Foods bought a 64.2 percent stake in Foodcorp for about R1bn.

The company said it was considering significant growth and expansion projects in South Africa and the rest of sub-Saharan Africa in the broader food and fast moving consumer goods space.

TSB produces 30 percent of South Africa’s sugar output, with Selati being its flagship brand. It has three sugar mills in South Africa at Malalane, Komati and Pongola with capacity to produce 700 000 tons of sugar a year. It also owns stakes in Swaziland sugar producers.

The acquisition is subject to approval by the Competition Commission.

Source: Business Report