Two South African companies to create R28 billion food giant
Premier Group is one of South Africa’s leading food producers, with the company set to benefit from the acquisition of RFG.
Sean Culverwell, Investment Analyst at Anchor Capital, said that Premier is headlined by its flagship Blue Ribbon brand, which makes it the “Shoprite” of milling and baking.
“The company’s growth strategy hinges on three core drivers: single-digit revenue growth, operating margin expansion, and declining finance costs,” said Culverwell.
“Premier’s consistent execution against these levers has delivered industry-leading growth since its listing, a trend we anticipate will continue through the coming year.”
He added that the acquisition of RFG creates a formidable company, with management feeling confident of closing the deal by the end of March 2026.
RFG is also a food producer specialising in food, dairy, juices and canned goods; its brands include Rhodes, Bull Brand, and Pakco.
Premier has offered to acquire all of the ordinary shares of RFG, excluding treasury shares, in exchange for Premier’s own ordinary shares.
Premier previously said that the transaction creates an opportunity for shareholders of both companies to participate in the future growth of the combined group.
Premier previosuly said that the combined group will have a combined annual revenue of about R28 billion and profit after tax of about R1.8 billion.
Anchor Capital believes that the deal makes strategic and financial sense, given the limited liquidity in Premier shares and the concentration risk of Millbake.
“Consolidating RFG addresses both, while also providing immediate earnings accretion,” said Culverwell.
“The industrial and route-to-market synergies between the two companies are obvious on paper, but such benefits are often difficult to deliver in practice.”
“However, CEO Kobus Gertenbach and his team have given us little reason to question their execution, so we look forward to seeing what Premier can achieve with the consolidated entity.”
Other improvements at the group
In addition to the RFG acquisition, the opening of the long-delayed Aeroton mega-bakery in November is also expected to be a major margin driver for the group.
The company can now consolidate its regional manufacturing footprint by mothballing its three older bakeries across Gauteng and the North West.
Lowering the requirement to transport bread from other facilities to service the area should lead to cost savings, while the new site also drives improvements in quality and service levels.
“Lowering the requirement to transport bread from other facilities to service the area should result in cost savings,
The Group already commissioned its Pretoria mega-bakery in 2023, and the benefits have been evident since it opened.
With the commissioning of Aeroten, Premier has also completed its Millbake capital expenditure cycle.
With the RFG deal also a share swap, rising cash on the balance sheet should also present an opportunity for management to increase the dividend payout ratio or buy back shares.
“Both of which would be the cherry on top of what is an already enticing investment case.”
Loading ...