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August 11, 2017

South Africa’s Sovereign Food Investments receives takeover bid from PE firm Capitalworks

South African private-equity firm Capitalworks has moved to buy a controlling stake in Sovereign Food Investments, the local poultry group.

By Simon Harvey

South African private-equity firm Capitalworks has moved to buy a controlling stake in Sovereign Food Investments, the local poultry group.

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The food and grocery sector thrived during the pandemic, largely due to the shutdown of the food service industry and the sector’s subsequent necessity, panic-induced bulk purchasing, and spending more time at home. The market has grown as a result of inflation. Consumer unwillingness to go out and socialize, and the reopening of several hospitality facilities, helped maintain the demand for groceries, particularly online, in 2021. As consumer behavior changes, we consume more food and drink at home, and inflation increases basket sizes. GlobalData predicts that the sector will continue to hold a higher share than had been predicted prior to the pandemic. This is true despite the fact that the food and grocery sector's share of overall retail will decline from its peak in 2020. This report will discuss market forecasts and key themes in the global food & grocery industry in 2022 and beyond. It covers:
  • Market drivers and inhibitors
  • Five-year forecasts and the impact of COVID-19
  • The performance of the online channel versus offline
  • Major trends in the market including rapid delivery, ambient retailing, supply chain disruption, and inflation
Assess developments within this sector to help your business thrive in 2022 and beyond.
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Shareholders in Johannesburg-listed Sovereign Food were advised yesterday (10 August) the company had entered into an “implementation agreement” with Capitalworks, which is offering to purchase all, or a portion of the ordinary shares outstanding for ZAR12 each, according to a stock exchange filing. Pursuant in that bid, is the recommendation to shareholders that the stock be de-listed.  

The proposed transaction will be conducted through Gallus Holdings, or Bidco, a special company set up by the private-equity firm to implement the deal. The “all-cash buy-out offer” values Sovereign Food at ZAR907m (US$67.2m) and is conditional upon Capitalworks acquiring more than half of the stock outstanding.

Under terms of the new offer, shareholders would have the option to reinvest their capital by disposing of their existing Sovereign Food units in return for those in Bidco, the filing said. With support from 50.8% of existing investors so far, the deal looks set to go through after an offer from fellow poultry processor Country Bird Holdings, which is also a shareholder, failed in 2016.

CBH, which in July 2016 already owned almost 10% of Sovereign Food, put in a bid for ZAR9 a share for the rest of the business. In September that year, South African authorities ruled the offer contravened regulations, in that the company tried to waiver the condition the bid must be accepted by a majority of shareholders.

Sovereign Food said in a July 28 stock exchange announcement it was in “unspecified talks” that could affect the company’s share price, a matter of months after reporting a loss in the year ended February. The ZAR12 a share offer from Capitalworks is based on the closing price on 27 July, the last trading day prior to the publication of the “cautionary announcement” by the Johannesburg exchange. 

Tom Pritchard, Sovereign Food chairman, said of the proposal: “The board was always open to recommending an offer to shareholders, provided significant shareholder value was unlocked. This is now the case. The board welcomes and supports this offer from Capitalworks, which comes at more than a 33% premium to another conditional offer which the board rejected about a year ago, which failed and then lapsed.”

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Free Report
img

What’s the forecast for the food and grocery industry?

The food and grocery sector thrived during the pandemic, largely due to the shutdown of the food service industry and the sector’s subsequent necessity, panic-induced bulk purchasing, and spending more time at home. The market has grown as a result of inflation. Consumer unwillingness to go out and socialize, and the reopening of several hospitality facilities, helped maintain the demand for groceries, particularly online, in 2021. As consumer behavior changes, we consume more food and drink at home, and inflation increases basket sizes. GlobalData predicts that the sector will continue to hold a higher share than had been predicted prior to the pandemic. This is true despite the fact that the food and grocery sector's share of overall retail will decline from its peak in 2020. This report will discuss market forecasts and key themes in the global food & grocery industry in 2022 and beyond. It covers:
  • Market drivers and inhibitors
  • Five-year forecasts and the impact of COVID-19
  • The performance of the online channel versus offline
  • Major trends in the market including rapid delivery, ambient retailing, supply chain disruption, and inflation
Assess developments within this sector to help your business thrive in 2022 and beyond.
by GlobalData
Enter your details here to receive your free Report.

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