There has been a smattering of action in the JSE’s food sector, the most notable being the surprise swoop by Premier Foods on RFG and the for sale sign being put up — and then promptly taken down again — at Libstar.
There are, of course, always mutterings of appetising dealmaking, and IM looks at possible “pantry permutations” at the major listed food counters
Tiger Brands, under the tutelage of veteran food CEO Tjaart Kruger, has regained its famous roar after having been reduced to a mere purr under previous management’s efforts. Kruger parachuted in from Premier Holdings in late 2023 and has sold off previous misadventures in territories elsewhere in Africa and in Chile, exited and sold off fruit canning and baby products, with even Tiger’s monolithic and lavish Bryanston head office being sold.
With the portfolio much improved, there is talk that chocolate and confectionery may also be exited. That will put the focus back on core brands and bring iconic grocery staples such as Tastic, Koo and Albany back to growth. It may lead some to ponder: where next for Tiger?
Kruger’s contract at Tiger has been extended until December 2028. With an improved operating base and balance sheet could Tiger consider joining mid-cap rival and Kruger’s former company Premier, and go on the hunt for acquisitions? Tiger’s balance sheet and heft would be able to swallow pretty much anything whole.
IM cannot see the company looking offshore. Its past adventures in Cameroon and Nigeria did not end well. Chile was sold. As market watchers have seen, when South African companies venture offshore, there can be a backlash as the list of failed deals and concerns on vainglorious ego expansion (Spar and Mr Price to name just two) have caused share-price calamity.
Should South Africa ever kickstart its economic growth and see a growing consumer base, perhaps Tiger may be a global target. PepsiCo swooped on Pioneer Foods in 2020 for R26bn, so there is that precedent.
More realistic pondering might lead one to ask if Tiger would be keen to enter some of the categories in which blue-chip company AVI has enjoyed much success in volume growth and pricing power. AVI and RCL Foods come to mind as both have previously been in the mix regarding attempts to acquire part or all of each listed entity.
Sector blue-chip comparative AVI Group has seemingly been trying to unlock value for some time. IM is aware of two adventures to sell its fishing section, I&J, but nobody has hooked that cyclical business.
A bid to buy Snackworks, which encompasses Bakers Biscuits and Willards, failed to make the valuation hurdle when US food giant Mondelez tried some years ago to add the unit to its grocery basket.
Veteran CEO Simon Crutchley may wish some assets, such as personal care, could be sold. But the price AVI wants for its goodies may be too high for some.
Crutchley has been CEO of AVI since 2005 and is 62. Kruger at Tiger Brands is still moving and shaking at 65. Both continue to operate at the top of their game, but boardroom life is finite. IM wonders if an eventual retirement swansong deal of the decade could be struck between these two sexagenarians.
The most recent sector action saw well-regarded Premier Group, the baking behemoth, agree to swallow mid-cap Rhodes Foods Group (RFG) in a deal valued at R7bn.
IM understands that Premier cast its slide rule over Libstar’s “for sale” offer but passed, and had considered RCL Foods. Premier settled on RFG given the unlock potential — not just in integration cost savings but the ability to expand output and brand extension potential within Hinds spices, Rhodes juices and RFG’s large ready meals business.
The market certainly lauded the deal, with both Premier and RFG’s share prices soaring as the market ran its Excel model on combination benefits. IM would argue that, for Premier, RFG was a “nice to have” rather than a “need to have”. Premier has revenues and an operating profit of R19.9bn and R1.9bn respectively. The addition of RFG, which has not been performing to its optimum recently, adds a near 40% bump to Premier in terms of revenue and profitability before integration and cost benefits ensue.
IM understands that Premier and RFG had been in an on and off discussion for about two years, but the sticking point was the valuation. Early permutations revolved around 10 RFG shares for one Premier. That did not cut the Premier mustard.
Private equity specialist Capitalworks is the majority shareholder in RFG, and IM believes discussions resumed in April 2025 and settled on a more favourable deal, with seven RFG shares for every one new Premier.
Since 2024, the Premier share price has soared 172%. Its earnings multiple rating has rocketed too, making the RFG deal highly accretive. Capitalworks is taking Premier paper. While there is no lock-in agreement, IM understands the private equity company will remain a material shareholder in the combined entity, alongside investment company Brait and retail tycoon Christo Wiese.
It’s worth pondering, once RFG is bedded down, if Premier will cast its acquisitive eye elsewhere
It seems Premier intends to open its substantial chequebook and pour capex into RFG to invest in its core power brands and divisions. Premier, with its infinitely larger balance sheet, sees the potential within Hinds Spices, Rhodes juices, ready meals and pies that RFG’s more limited balance sheet could not fully meet in a timely fashion. Furthermore, with Premier’s wide customer reach and distribution footprint, an uplift in volumes post investment and increased capacity at some of RFG’s 15 manufacturing sites aids the attractions of the overall deal.
Margins in some RFG categories are more than 20% and these units will have capex thrown at them, while the lesser margin businesses and more cyclical operations might, in due course, be rationalised or sold.
It’s worth pondering, once RFG is bedded down, if Premier will cast its acquisitive eye elsewhere as it seeks to enlarge its groceries basket.
RCL Foods, controlled by investment company Remgro, usually moves at a glacial pace. However, RCL Foods, itself an amalgamation of various interests over the decades from Rainbow Chicken, Vector Logistics, Foodcorp and Transvaal Sugar Board (TSB), has more recently been shaking the tree.
Vector Logistics was sold; Rainbow Chicken was unbundled and listed separately on the JSE in June 2024, with ongoing hopes that TSB will also leave the laager given its volatile earning contribution. With Remgro owning giant fats and oils business Siqalo Foods and controlling 80% of RCL, gossip of a de-listing and/or tie-up with Siqalo have long had market food followers salivating
The market has assumed for years that Rembrandt would de-list RCL and merge the entity with Siqalo. Remgro could happily sit with the mixed sweet and sour performance of TSB, given that the market remains ill at ease with sugar being part of the RCL mix.
Perhaps at some stage, once Premier has digested RFG, a return to RCL could occur as the greater combination of an enlarged Premier and the RCL Foodcorp arm. This would give Premier access to leading brands in groceries and pet food — including Nola mayonnaise, Yum Yum peanut butter, Ouma rusks and Bobtail. IM sees a permutation where Remgro swaps RCL for shares in Premier.
The JSE-listed chicken businesses have not had any specific M&A activity — though the scandalous revelations of maleficence and incompetence at PIC-owned Daybreak Chickens, which led to its liquidation, has removed from the poultry sector an errant player that stuffed market pricing.
Normality has returned to the henhouse sector and this corporate collapse, alongside materially lower soft commodity prices in the past months, saw sector big bird Astral Foods and listed competitor Rainbow Chicken hit new 52-week share price highs before the Middle East conflict.
The ongoing tussle in the egg and broiler farming space continues with the long-running battle between unlisted poultry stock Country Bird Holdings (CBH) and Quantum Foods seemingly no nearer to any resolution. Quantum Foods has applied Stalingrad tactics to keep CBH at bay.
Kariega (formally Uitenhage)-based unlisted poultry group Sovereign Foods, owned by Capitalworks private equity, emerged as the kingmaker. In a frenetic spending spree it acquired a 15.5% stake in Quantum, which effectively blocked CBH’s efforts.
Capitalworks took Sovereign Foods private in 2017, paying a princely R907m. Away from the quizzical gaze of the market, Sovereign Foods aimed to boost its supply capacity and strengthen its position as a major South African poultry producer.
IM believes Sovereign’s weekly production is around 1.7-million birds, CBH at 2.4-million, Rainbow 4.6-million and Astral at 6.1-million chickens a week. In poultry, scale and efficiency are everything — especially if one is a fully integrated feed, breeding, hatchery and production facility.
With the stake in Quantum Foods, IM speculates that Capitalworks and Sovereign Foods may be looking at a reverse of Sovereign into Quantum Foods to create another significant sector player. But with ongoing warring between the shareholder groupings, let alone all the legal shenanigans, there would need to be more clarity on shareholder structure for such a combination to occur.
At the smaller end of the food sector, there is micro-cap Crookes Brothers. It is valued at R271m and its stock is down 40% in the past 12 months. The group is a mixed bag of operations in sugar plantations, bananas, macadamia nuts and property — which has left the market wondering when 45% owner Silverlands Private Equity will ever unlock value. With a net asset value of R66.72 a share, Crookes seems ripe for some form of M&A (especially given all the coastal property development in KwaZulu-Natal).
Then there are the unlisted assets that might, at some stage, be up for grabs. Listed counters may well drool over Ina Paarman’s Kitchen — the premium family condiments, baking products and sauces business. Founded in the early 1980s, the brand is now a well-known range of quality products that IM believes has been on the shopping list of many — but the sticking point has been the sale price.
Hidden within some agricultural co-ops are interesting assets that may be deemed, at some stage, noncore. Acorn Agri owns the Montagu snacks brand — a leading national supplier of dried fruit, nuts and biltong. Giant Free State co-op VKB owns VKB Foods which encompasses maize meal, flour, bakery items (bread, confectionery) and Grain Field Chickens.
Within the meats sector, giant privately owned Karan Beef was slated to be sold to the PIC in a R5.2bn deal in 2018 but quietly disappeared. Pork producer Eskort, owned by a consortium of shareholders, has a 108-year-old heritage. The multibillion-rand business is involved in a variety of pork products and is owned by a consortium of shareholders. Either asset might interest a large, listed food counter.
Anthony Clark
