MARC HASENFUSS: Are the stars starting to align for the JSE’s food sector?

The JSE’s food sector has provided plenty of ingredients for speculation among IM’s team of writers over the past few years.

Though IM might have suggested certain tie-ups that could enhance the profit recipe at any number of the bourse’s food counters, we have not seen a heap of moving and shaking.

In fact, it’s been fairly lean fare. Rainbow Chicken was removed from the rump of RCL Foods; Tiger Brands has disposed of a few segments and brands; and microcap AH Investments, which owns the All Joy condiment brands, opted to shuffle off the JSE. Unlisted poultry producer Daybreak Foods, which is in business rescue, is also being peddled to potential buyers.

Of course, one can’t ignore the wholesome capital expenditure by a few food groups in bolstering and modernising key production facilities, thereby winning market share and fattening margins. Take a bow, Premier and RFG. Arguably, these initiatives were smarter capital allocation decisions than taking on the risk of integrating a sizeable acquisition.

At the time of going to press, Libstar — which has featured strongly in our food sector deliberations — confirmed that it had received “nonbinding, indicative expressions of interest”. These could entail acquiring Libstar outright — a proposal the board will evaluate.

This is nutritious fodder for long-suffering Libstar shareholders who have endured a lean time since the group was listed on the JSE in mid-2018. A bid for the entire Libstar, which has a market value of about R3bn, is far more palatable than selling off bits and pieces of this diversified food producer. I understand that previous tilts at parts of Libstar — which is incredibly diversified and specialises in niches — were rebuffed.

Fortunately, Libstar’s push to deliver meaningful value unlock for shareholders (including its patient private equity partner) coincides with the group releasing a robust set of profit numbers. A final takeout price will be fascinating to gauge, especially if management is confident that the business, as a whole, is on the front foot again.

The initial market reaction was tempered, but I’d be surprised if an offer is not north of 500c a share, given that Libstar raised R1.5bn in its prelisting offer, pitched at between R12.50 and R16 a share.

Maybe Libstar is the first of many food sector forays on the JSE as the year runs to a close. Can we expect developments at a tensely tied-up Quantum Foods next, possibly Sea Harvest re-angling itself as a pure seafood play or perhaps Remgro moving to tuck up RCL Foods?

And then, there are more than a few punters who reckon Tiger Brands could be on the prowl again, looking for something big to pounce on …