Township David set to slay JSE Goliath
Sources indicate Molope Bakeries is cooking up a deal to buy Foodcorp, writes THABO KOBOKOANE
Molope, worth about R250-million, is keen to buy the 38% of Foodcorp held by Sanlam's investment arm, Sankorp. Sankorp's stake is worth around R550-million, valuing the whole of Foodcorp at about R1.7-billion.
Ramaphosa, also chairman of Johnnic, would not comment, while Foodcorp chief executive Dave Kennealy says he is "not aware of any negotiations".
Marinus Daling, Sankorp chairman, reiterated the group's commitment to sell Foodcorp, but did not divulge potential suitors.
However, banking sources close to talks said negotiations, which had been on for several weeks, were "close to finalisation".
Several recent events suggest a deal is imminent. There have been massive volumes of Foodcorp shares traded on the JSE, while over-the-counter trade in Molope has been very active. Molope's price rose from just under 200c last month to 265c on Friday. A line of 1.75-million Molope shares that had been overhanging the market was taken up this week - the stock is now actively bid with no sellers.
Finally, Molope has called a shareholders' meeting on June 27 to double ordinary share capital to R2.4-million ordinary shares and create 1-billion 'N' shares.
"Unless a major deal is in the offing, the issue of a billion N shares doesn't make much sense," says one source. At the meeting the group will also change its name to Molope Foods, in line with broader ambitions.
If successful, the deal will promote Molope into one of the country's largest food groups, and satisfy Foodcorp's hunger for a black empowerment partner.
Molope hit the limelight after it emerged that Ramaphosa had taken a 10% interest in a private placement which raised R30-million.
The group, started by Sam Molope in the 1970s and running three bakeries in townships around Pretoria, intends to list at the end of July and is seeking strong backing from local financial institutions.
Ramaphosa is on record as saying "unbundling opportunities are on the horizon, including linking up with a foreign partner".
JSE analysts close to talks say "although negotiations are continuing, some kind of agreement is already in place". It is rumoured to be heads of agreement.
Market talk is that the deal will be priced at a premium of up to 20% above Foodcorp's current share price of R34 a share, valuing the entire stake at between R1.7-billion and R1.8-billion.
Following approval from the June shareholder meeting, the acquisition could be funded without Molope having to issue new ordinary shares.
Talk is that the deal will be funded by raising R300-million from institutions which are "willing to hitch on Ramaphosa's back" and take up the N shares.
Molope could raise a similar amount from the sale of Foodcorp's meat business, Kanhym.
But the most interesting aspect of the deal involves US food giant Cargill, which is said to be interested in a stake in Foodcorp's Ruto Mills, one of the largest millers in the southern African region. The price tag could be between R800-million and R900-million.
Cargill, a diversified multinational with interests in food, steel and commodity trading, had worldwide sales of $55-billion in 1996. It returned to South Africa three years ago, and in March announced its first acquisition of Carnia Seed, a subsidiary of Omnia Group. Thad Goff, managing director of Cargill SA, denies it is involved in any other acquisitions.
"We have our hands full with Carnia and can tell you that Cargill will not be there when the Foodcorp race is concluded."
Shares in Foodcorp, a former Malbak subsidiary which produces brands such as Simba, Renown and Enterprise, have been very active recently, rising from R28 in April to R34 at present.
It is understood Sankorp was previously approached by Brian Joffe's Bidcorp group, but he was told Foodcorp was looking for a black empowerment partner.