South African dairy firm Clover says in takeover talks, shares soar
* Shares jump 15 percent
* Clover has boosted profit with new strategy
(Adds analyst quote, background)
By Tanisha Heiberg
JOHANNESBURG, Oct 19 (Reuters) - Shares in South Africa's
Clover Industries raced to their highest in almost two
months on Friday after the dairy company said it is in talks
with an unnamed firm that intends to acquire all its shares.
Clover, which processes products including yoghurt,
beverages, cheese and olive oil, has focused on developing
higher margin, value-added branded food and beverages as part of
its strategy to move away from lower-margin commoditised dairy
The company, which has a market capitalization of 2.73
billion rand ($190 million), did not provide further details on
the potential takeover, which comes as it recovers from a
drought and depressed milk prices.
Clover's shares jumped as much as 15 percent to 16.40 rand,
their highest since Sept. 4, outperforming the All-share
on Friday which was down 0.36 percent at 1106 GMT.
"It could be one of the private equity funds or one of the
big food producers, it is unlikely to be Tiger Brands as they
have had more than their fair share of problems," said Ron
Klipin, portfolio manager at Cratos Wealth.
Tiger Brands, which produces grocery brands ranging
from peanut butter to cleaning products, shed more than a third
of its market value, some 28.4 billion rand ($1.96 billion),
since it was implicated in the world's largest outbreak of
listeria on March 4 which killed more than 200 people.
Clover said it had lost 6.5 million rand a month in fees
earned on services such as production, sales and merchandising
and distribution for a competitor, after processed meats were
recalled by health authorities during the listeria outbreak.
Klipin said other potential buyers could be Zeder
Investments, which holds a 27 percent stake in Pioneer
Clover spun off its raw milk business last year to form the
Dairy Farmers of South Africa (DFSA), in which Clover holds a 26
percent voting right.
"They have done the right thing over the last couple of
years, reinventing the company," said Klipin.
In September, Clover reported a tripling in normalised
annual profit, boosted by its exit from the milk business and a
recovery from drought the previous year.
"From an earnings point of view, they are going in the right
direction. The last set of results was very positive. Whoever is
buying it has definitely come in at the right time," said Greg
Davies, equities trader at Cratos Capital.
($1 = 14.3840 rand)
(Additional reporting Patricia Aruo
Editing by James Macharia and Emelia Sithole-Matarise)
First Published: 2018-10-19 10:49:14
Updated 2018-10-19 13:33:28
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