13 Jan 2015 Rhodes Food to buy fruit juice firm Pacmar

Rhodes spent the bulk of the capital it raised in a prelisting private placement on repaying debt, but said last year the proceeds of the capital raising would also be used to grow production capacity and pursue acquisitions.

Pacmar manufactures and distributes fruit juice products in local, regional and international markets under various third-party brands, private label programmes and its own brands. The latter include Wilde, Amazing, Zing and Crystal Falls. It offers many formats and options of pasteurised, preserved and aseptic juices and wines in plastic, Tetra Pak, Elopak and bulk packaging. It also owns the flavour house, Fruition.

Pacmar’s earnings before interest, tax, depreciation and amortisation for its financial year through last July were R22.2m, from revenues of R368.8m.

Rhodes said the deal was aligned with its strategy “of expanding its business through lateral extensions into product categories adjacent to its current product ranges”.

With fruit plants in the Western Cape and Swaziland, Rhodes produced “an extensive range of fruit purees and juice concentrates which it sells to the international beverage industry. The acquisition offers a significant opportunity to add further value to these products.”

Said CEO Bruce Henderson: “Pacmar has been a client of ours (we’ve provided it with the fruits for its juices) for some time and we felt that owning the company would not only allow us to extend our product offerings, but also improve our marketing and sales operations as it provides access to new retailers to whom we can also market our existing products.”

Henderson said RFG won’t be changing much about Pacmar but instead incorporating its existing brands into what is working well with its model. The company will, for example, create a Rhodes juice brand to add to its already vast array of products.

In South Africa, the Rhodes brand has leading market share positions in canned pineapple, tomato paste and jam in glass jars, supported by number two positions in canned fruit, canned jams, canned vegetables and canned tomatoes.

Commenting on the transaction, independent analyst Ian Cruickshanks said it could only improve RFG’s prospects going forward.

“All of the ready-made meals at Woolworths are produced by RFG, so that serves as an indication of the quality of their product. And they are very strong on fruit and vegetable production themselves so this acquisition will increase their production and scale as they control the inputs.

“Most importantly this allows them to grow significantly, in one instant – something that would be very difficult to do otherwise. It makes for fantastic vertical integration into the company and it won’t put much strain on their finances either because they didn’t need to borrow to make the transaction happen,” said Cruickshanks.

Pieter Hanekom, who was the executive responsible for The Ceres Beverage Company for 13 years and who recently joined the Rhodes executive team, would, among other responsibilities, head the juice operation.

The acquisition is subject to conditions, including internal and regulatory approvals.

Pacmar was established by MD Kabous Marra in 1998 on on his Wellington farm, Oudebrug, with a few stainless steel tanks, a blender and a 1 500 litre/day capacity.
Marra was one of the then Cape Technikon’s (now CPUT) first food technology students.