BidCorp said the acquisition was in line with its strategy to expand its footprint into geographies which offer solid growth in the out-of-home food service market.
Chief executive Bernard Berson said BidCorp had made the acquisition as it believed in the prospects of the Spanish food service market.
“We believe that Guzmán is an ideal fit for BidCorp and we share very similar values and ideas about the future direction of the out-of-home market,” Benson said.
Guzmán supplies hotels, restaurants, industrial caterers and other institutions throughout Spain.
The Spanish company is currently owned by Miura Private Equity and management. Management has agreed to retain a 10 percent interest in the company.
It was founded more than 80 years ago and specialises in the supply of fresh fruit and vegetables It also has an extensive range of gastronomic and value-added products, including salads, hand-crafted bread and sauces developed in conjunction with top local chefs.
The company serves more than 4000 customers with approximately 2200 deliveries a day and it has a national presence through its key operating platforms in Barcelona, Madrid, Sevilla, Bilbao, Alicante, Ibiza and Vitoria-Gasteiz.
Chief executive Jordan Franch said Guzmán ’s revenues were estimated at 100 million euros for the financial year to end December 2017.
“We are delighted to be part of the BidCorp group and believe the transaction will be transformative, not only for Guzmán , but the entire Spanish food service market,” said Franch. “By leveraging Bidcorp’s global network, expertise and best practice, we are able to enhance our service offering to our customers and deliver greater value to all our stakeholders.
"The entire Guzmán team is aligned with the culture and entrepreneurial spirit that BidCorp represents.”
BidCorp said the Guzmán acquisition, together with other opportunities in Spain and greater Iberia, would enable it to position itself as one of the leading food service companies in south-west Europe.
Damon Buss, an equity analyst at Electus Fund Managers, said the purchase was a continuation of BidCorp strategy of doing bolt-on acquisitions to bulk up their operations in the geographies where they operated, allowing them to gain economies of scale and hence improve margins.
“In the 2017 results, BidCorp noted they had done eight bolt-on acquisitions for R496 million. Spain’s horeca (food-service) market is very fragmented and so provides the opportunity for a company like BidCorp to consolidate it.”
Buss said that while Guzmán would add significant scale to Bidcorp’s Spanish operations, it would only amount to 5 percent of the overall European units and 1 percent to group revenue.
“Without knowing how much BidCorp paid for the stake and what the margins of the business are, it is difficult to judge whether the individual acquisition is a good one or not. We do like Bidcorp’s bolt-on acquisition strategy, especially in the Europe division, which has the second lowest margin of the four divisions, as the increased scale should allow Bidcorp to increase the margin closer to the 5 to 6percent achieved in Australasia and the Emerging Markets divisions,” said Buss.
Ron Klipin, a senior analyst at Cratos Wealth, said BidCorp had a strong balance sheet to make such purchases. “The other important point is that it gives BidCorp some geographical diversification and even without Brian Joffee, the company continues to make these important deals which are good for the company’s growth beyond the South African borders like this bolt-on acquisition,” said Klipin. “The acquisition is a good hedge for the rand as the company will be able to earn foreign currency.”
BidCorp shares rose 0.71 percent on the JSE to close at R273.01.