Clover Industries’ share price surged by more than 16 percent on Monday it received a buyout offer from a newly formed consortium, Milco. Photo: Simphiwe Mbokazi/African News Agency (ANA)

DURBAN – Clover Industries’ share price surged by more than 16 percent on Monday after the consumer goods and products company announced that it had received a buyout offer from a newly formed consortium, Milco, valuing Clover at R4.8 billion. 

Clover said in a statement that the fully funded cash offer represented a 77 percent premium to its closing price of R14.10 on October 18, 2018, the day prior to Clover issuing its original cautionary announcement.

Clover jumped to R23.80 a share, its highest in more than a year, up from Friday’s closing price of R20. Its shares closed at R23.01 yesterday.

Milco offered to buy its entire issued share capital of Clover for R25. Milco plans to delist Clover from the JSE and the Namibian Stock Exchange.

Clover said the consortium had secured the funding for the acquisition through its own cash resources, as well as bank facilities. 

Milco has been formed by a consortium of international investors led by Israel’s Central Bottling Company (CBC). The consortium said it had secured support from a number of Clover’s major shareholders, who held 49 percent of Clover’s shares.

Post-transaction, Milco would be owned 60 percent by CBC, 15 percent by Brimstone, 11 percent by Ploughshare Investment, 8 percent by IncuBev and 6 percent by Clover management, who would reinvest a substantial portion of the proceeds from the sale of their Clover shares and share options into Milco.

CBC is a privately owned international food and beverage group, which has subsidiary companies that serve more than 160 million consumers across the globe. 

Aran Oelsner, the chief executive of CBC, said: “We are investing in a well-run company and are taking a long-term investment approach, which reflects our confidence in the prospects for the local economy. We believe that combining Clover’s abilities with our global expertise will provide real opportunities to grow Clover’s dairy and beverage portfolios across sub-Saharan Africa.”  

Brimstone chief executive Mustaq Brey said Clover presented an opportunity for Brimstone to continue expanding its investments into the food sector, which was one of its portfolio’s primary focus sectors. 

Ron Klipin, a senior analyst at Cratos Capital, said the R25-a-share offer looked very attractive based on the share’s recent level of about R17 in early January and its low of R14 in October last year.   

“The price offered seems to indicate that there is upside growth potential despite low returns on invested capital. Clover has a strong portfolio of brands, having moved successfully into value-added higher-margin products in the past few years,” Klipin said.

However, he said that market sentiment on small-cap shares had been negative due to a lack of liquidity, as well as a perceived higher-risk profile. “This has resulted in some small-cap shares being delisted from the JSE by private equity funds looking for cheap assets that have a turnaround potential,” Klipin said.