Bruce Henderson. Picture: SUPPLIED
Bruce Henderson. Picture: SUPPLIED

A row over job cuts at Rhodes Food Group’s subsidiary Ma Baker has spilled into the open.

Ma Baker founder Wayne Lund alleges that the move was in contravention of the April 2017 sale agreement and Competition Commission conditions for the merger.

Lund, who in 1987 established Ma Baker – a producer of pies, pastries and snacking products – said this week that Rhodes had left a number of the company’s former employees in the lurch, but Rhodes CEO Bruce Henderson disagreed.

"I was confident that I was leaving my staff in good hands. Ma Baker had not made a … single loss [in] over 30 years of trading," said Lund.

"It became obvious to me, as people were fired on an ongoing basis that Rhodes never intended to honour their commitment to my former staff members, many of whom had over 20 years of service."

Rhodes, the brands of which include Bull Brand, Magpies and Bisto, bought the KwaZulu-Natal-based Ma Baker for R212m, in a deal that gave the food producer a bigger footprint in the pie and pastry market.

When it concluded the deal, the Ma Baker transaction was Rhodes’s largest deal since the company’s 2014 JSE listing.

The disagreement between Lund and Rhodes points to different understandings of finer details of the multimillion-rand deal. On Thursday, the company disputed Lund’s allegations and insisted that the retrenchment of the 12 employees was within the law and in compliance with the commission’s conditions.

Henderson said it retrenched the workers from November 2017 to September 2018, but denied the retrenchments were related to the transaction.

"These retrenchments were lawfully effected for operational requirements unrelated to the merger and in compliance with the conditions imposed by the Competition Commission," said Henderson.

Lund also accused Rhodes of closing distribution centres in Port Elizabeth, Cape Town, Bloemfontein and Johannesburg. But Henderson said the facilities closed were expensive.

"A decision was taken in the ordinary course of business to outsource this function to a third-party service provider at approximately 60% of the internal cost," he said.

Henderson attributed the retrenchments to a highly competitive market, which required the firm to be optimally structured and fully efficient from an operational point of view.

"This requirement has been even more prevalent in the extremely tough economic conditions in which SA currently finds itself," he said.

Henderson said that the Competition Commission prohibited retrenchments for three years from the effective date.

"The commission was, however, explicit in terms of exactly what was not considered to be a retrenchment," he said.

Retrenchments did not include voluntary separation arrangements, voluntary early retirement packages and "terminations in the ordinary course of business", according to the text of the commission’s decision.

Henderson said Rhodes’s extensive due-diligence investigation on Ma Baker before the merger had uncovered food-safety problems and inefficiencies. Operational requirements that had already been considered by the seller were brought to Rhodes’s attention.

"Various scenarios were considered to address these, but no conclusion was reached on the optimum structure until the merger had been effected," said Henderson.

njobenis@businesslive.co.za