SOUTH AFRICA – Rhodes Food Group, maker of canned fruit and ready meals, said on Monday it would buy the business assets of food manufacturer Alibaba for R42m.

The acquisition further strengthens Rhodes Food’s position in the bakery and snacking category, particularly through the convenience channel.

Alibaba, based in Athlone, Cape Town, manufactures halaal Eastern food products including samoosas, pies and rotis, which are sold to South African food retailers, forecourt bakery outlets and independent traders.

The deal, the sixth acquisition Rhodes has made since listing on the JSE last year, would be effective on February 1, the company said.

Rhodes, which owns Magpie and Bull Brand, has a strong position in the retail private label sector, supplying Woolworths with ready meals, and global players such as Waitrose and Tesco with canned fruit.

Early last month, the group acquired global food manufacturer General Mills’s South African operations for an undisclosed sum. The buyout added muffins, croissants, biscuits and pizza to the list of convenience foods it will distribute.

Ron Klipin, an analyst at Cratos Wealth, said Rhodes was filling its “basket” with more niche products.

“They started off with a very small base — they have a great business with Woolies (Woolworths) and then their traditional business with canned food; they have subsequently diversified into specific niche foods.

“They moved into the value-added bakery category, which is different from the kind of staples that bigger guys like Tiger Brands and Pioneer Foods make, which are very high volume and low margin,” he added.

Alibaba’s net asset value at the end of its latest financial year was R10.990m. The company’s earnings before interest, taxes, depreciation, and amortisation for the financial year ended February 28 amounted to R6.172m on revenue of R48.206m.

Although seen as a safe haven in tough economic times, the South African food manufacturing sector has been experiencing intensified competition.

Both AVI and Pioneer have benefited from Tiger Brand’s costly blunder with Dangote Flour Mills, which has seen huge writedowns for the group, resulting in a drag on its price: earnings ratio.

November 6, 2015;