Majority shareholder of South African RCL Foods offers to buy company’s shares

SOUTH AFRICA – RCL Foods, South African consumer goods and milling company has received a bidding offer from its majority shareholder, Remgro to acquire over 100 million shares of the company in a bid to unlock the company’s value and turn its fortunes around.

According to reports by Business Day, the heavyweight investment company is willing to spend as much as R805m (US$52.7m) to raise its stakes in the company, a move that will give minority shareholders an easy pay out in the highly illiquid stock. 

To this end, Remgro, which already holds 76.6% of RCL after picking up an additional 12% in November, has indicated that the acquisition of the stake should not be construed as a takeover.

If successful, Remgro will increase its holding to about 83%. The investment holding firm will start making bids for R8.05 per share until markets close on December 11. 

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“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.

RCL is among the most illiquid shares on the JSE with shares worth just 4.8% of its nearly R8bn (US$524.2m) market capitalisation 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.

“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

The owner of brands such as Selati sugar, Ouma rusks and Rainbow Chickens, has been hit hard in 2020, partially due 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 (US$62.8m) for its year to end-June, from a loss of R183.9m (US$12.05m) previously, amid R1.5bn (US$98.28m) in writedowns to its chicken business to reflect the economic pressure due to Covid-19.

RCL is also in the midst 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.

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