Bidvest: UK listing may help fund US deals

28/02/2011 Bidvest Group CEO Brian Joffe presenting their interim Results at Sandton JHB. (307) Photo: Leon Nicholas

28/02/2011 Bidvest Group CEO Brian Joffe presenting their interim Results at Sandton JHB. (307) Photo: Leon Nicholas

Published Sep 1, 2014

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Johannesburg - Bidvest said listing its international food services unit in London may provide cheaper funding to expand into new markets, including the US.

“It has been quite complicated to continue to fund significant acquisitions abroad out of the South African balance sheet,” chief executive Brian Joffe said on a conference call today.

“Management are quite keen, having now expanded into Europe, South America, to potentially get involved in the US.”

Bidvest's diverse operations from auto showrooms to shipping and office furniture make it South Africa's second-biggest company by sales, but it has long acknowledged the need to separate its food business from the rest of the group because its true value was not fully reflected in its share price.

“Markets are particularly buoyant, money is cheap and there's quite a lot of demand for this particular asset,” Joffe said.

Bidvest, which in 2011 rejected buyout bids for the business on the grounds that they would not have benefited shareholders, said on Monday that a separate listing would unlock value because it is becoming increasingly difficult to fund growth with a South African balance sheet.

Joffe, a renowned dealmaker, also said the division is looking at entering the United States through acquisitions but that such deals would put strain on the group's cashflow unless the business can fund itself.

“The kind of money involved to pursue an acquisition in the United States is quite significant and therefore one has to consider 'how do you continue to fund the business going forward?',” he said.

The food service business, Bidvest's biggest division and one that contributes more than half the company's 183.6 billion rand in sales, supplies pubs, restaurants and hotels in Europe, South America and Asia.

The company is evaluating a stock sale in London for its food-service business as investor interest grows after deals in the UK and Italy.

Joffe said the funds involved to pursue an acquisition in the US are “quite significant.”

For the year ended June, trading profit advanced 17 percent to 8.9 billion rand, Bidvest said in a statement today.

Sales rose 20 percent to 183.6 billion rand, of which food services ranging from distribution to ingredient manufacturing, accounted for more than half.

“The prospects for the group remain positive, supported by the anticipated benefits arising from the significant acquisitions and investments made over the past year,” it said.

Acquisitions added 7.2 billion rand in sales last year.

“In South Africa, trading conditions are expected to remain tough, compounded by the impacts of a rising interest rate climate, its impact on consumer demand and low economic growth.”

The South African Reserve Bank raised its benchmark interest rate for the second time this year on July 17, cutting disposable income for borrowers.

Africa’s second-largest economy shrank in the first quarter of this year because of a five-month strike at the world’s largest platinum producers.

Bidvest also said it has not made a decision on whether to take control of struggling local drugmaker Adcock Ingram.

Citing a document from the Competition Tribunal, Reuters reported last month that Bidvest intended to increase its stake in Adcock to more than 50 percent.

“Given uncertainty around current trading performance, Bidvest continues to evaluate its position and has not determined whether to take steps to achieve control,” Joffe said.

Adcock, in which Bidvest owns about a third, reported a hefty nine-month loss last week after writing down everything from drug inventory, factories and trademarks to businesses in Ghana and India. - Bloomberg News and Reuters

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