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FAMOUS BRANDS LIMITED - Acquires Tomato Paste Plant and Plans to Partner with Local Farmers in Strategic Venture

Release Date: 04/07/2016 07:05
Code(s): FBR     PDF:  
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Acquires Tomato Paste Plant and Plans to Partner with Local Farmers in Strategic Venture

FAMOUS BRANDS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1969/004875/06)
JSE Share code: FBR
ISIN code: ZAE000053328
(“Famous Brands” or “the company”)

FAMOUS BRANDS ACQUIRES TOMATO PASTE PLANT AND PLANS TO PARTNER
WITH LOCAL FARMERS IN STRATEGIC VENTURE

Johannesburg; Monday, 4 July 2016: In line with the Group’s
strategy to build Supply Chain capability and capacity, Famous
Brands has acquired a state-of-the-art tomato paste manufacturing 
plant, Cape Concentrate, situated in the Coega precinct in the 
Eastern Cape. The practically unused facility, constructed in 2010 
at a cost of R200 million, was bought out of liquidation at a 
significantly discounted purchase consideration, and below the 
threshold of a categorised transaction in terms of the Listings 
Requirements of the JSE Limited. The acquisition will be funded 
from cash reserves.

Kevin Hedderwick, Famous Brands’ Group Strategic Advisor
responsible for M&A activity, says, “This acquisition will
enhance the Group’s capability to manufacture licensed products
for our franchise network as well as provide security in respect
of a significant menu item and manufacturing ingredient. We
also plan to expand the customer base for this product beyond
our own internal customers, capitalising on the shortage of
tomato paste which exists in the South African market.”

Illustrating the strategic potential of this business, Hedderwick 
notes, “The local industry is unable to supply growing demand for 
the product, and some 30-35 000 tons of tomato paste are imported 
by South Africa annually to meet the shortfall.”

He adds, “Famous Brands itself currently imports in the order
of 1 500–2 000 tons of tomato paste per year for use primarily
in our Sauce and Spice plant, which manufactures sauce products
for the Group’s 2 600-strong restaurant network as well as for
our retail (trade) customers.”

Hedderwick comments, “In terms of supply, we are satisfied that
we can expediently establish a local supplier network to provide
the required raw material volumes. In addition, the plant and
premises are in immaculate condition, so we have effectively
acquired a turn-key facility - at a small percentage of its true
value.”

Management’s intention is to model the new business on the
Group’s very successful empowerment venture, Famous Brands Fine
Cheese Company (FBFCC), formerly Coega Cheese Company.

“In 2013 we established FBFCC as a green-field venture, in which
we co-opted local farmers to supply milk for the production of
Mozzarella, cheese slices and cream cheese for the Group. When
the dairy was initially commissioned in May 2013, our milk intake
volumes were in the order of 16.5 million litres per annum.
That volume has grown to 38 million litres of milk per annum.
This joint venture has been a spectacular success for all of the
partners in the business,” Hedderwick says.

The new company will comprise a strategic alliance partnership
between local farmers, who will grow tomatoes on contract, and
Famous Brands, which will be responsible for providing the
customer base, as well as managing the production and route-to-
market functions.

The partnership will provide much needed employment in an
economically distressed area (some 35 jobs will be created in
the plant itself), and deliver substantial financial benefit 
for the farmers who will gain an instant, robust market for 
their produce and the potential to develop that market over 
time.

Hedderwick says, “As soon as possible, we will actively recruit
previously disadvantaged farmers in the area for our supplier
network. We will also tap into our existing FBFCC farmer base
to gauge their interest in this new opportunity.”

It is anticipated that the operation will be commissioned early
in the 2017 calendar year.

Hedderwick concludes, “The success we have achieved with FBFCC
is extremely encouraging and has provided us with a blueprint
for similar empowerment ventures; this acquisition is not only
a major strategic coup for Famous Brands, but will boost a
province which is in desperate need of investment.”

For further information:

Kevin Hedderwick                    Frederic Cornet
Famous Brands                       Instinctif
Telephone: 011 651 5812             083 307 8286


Midrand
4 July 2016

Sponsor
The Standard Bank of South Africa Limited
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