A worker walks past polony products after they were removed from the shelves of a chain store outlet in Johannesburg. The strain responsible for 90% of cases of listeria infection in 2018 was traced to polony made in a Tiger Brands factory in Polokwane. Picture: REUTERS
A worker walks past polony products after they were removed from the shelves of a chain store outlet in Johannesburg. The strain responsible for 90% of cases of listeria infection in 2018 was traced to polony made in a Tiger Brands factory in Polokwane. Picture: REUTERS

SA’s largest food producer, Tiger Brands, has received several offers for its processed-meats business that was at the centre of the world’s biggest   listeriosis outbreak in 2018.

The outbreak — which caused 209 deaths, including 91 babies  and infected more than 1,000 people — was traced to Tiger Brands’ Enterprise facility in Polokwane, Limpopo.

The victims have launched a class-action lawsuit against Tiger Brands. The company said on Friday the looming sale of the processed meats business would not affect the class action “in any way”.

The class action will determine Tiger Brands’s liability in the outbreak as well as the extent of damages due to claimants if the company is liable.

Tiger Brands, the headline earnings per share of which fell 12% in the six months to end-March, said the sale of the value-added meat products business was on the cards before the outbreak.

Tiger Brands’ strategy review of its portfolio in 2017 earmarked the processed-meats business for further evaluation “given the business’ unique value chain and the perishable nature of its underlying products”.

Delayed evaluation

Tiger Brands spokesperson Nevashnee Naicker said the processed meats division had special logistics requirements. “It needs refrigeration, cold storage, cold transportation,” Naicker said.

The company said the outbreak, which culminated in the closure of some manufacturing facilities, delayed the evaluation of the business.

“With the business having reopened at the beginning of the 2019 financial year, the board considered it appropriate to initiate the review, which confirmed that the [value-added meat products] business was not an ideal fit within the Tiger Brands portfolio and that consideration be given to exiting the category by way of a disposal.”

Warwick Lucas of Galileo Capital said the processed meats business is not suitable for Tiger Brands, which is “focused on brands”.

“While brands have value in processed meats, there is also a brand cross-contamination risk, which is exactly what [the company] doesn’t want”, Lucas said.

He expects the business’s buyers to be private rather than public companies.

Sasfin Securities deputy chair David Shapiro on Friday said the possible sale of the business is not surprising.

“The processed meats business was a bit of a paradox for Tiger Brands. [Tiger Brands] has always been associated with milling and maize and fast-moving consumer goods [FMCG]. I think various managements over the years tried to steer the company towards FMCG and away from the vagaries of commodity- type businesses like bread and cereals,” Shapiro said.

Tiger Brands’s other businesses comprise milling and baking, grains, groceries, snacks and treats and beverages concerns.

Due diligence

After the announcement, Tiger Brands’s share price surged for most of the day, closing 6.23% higher at R234.50.

The company said that since November 6, following receipt of offers for the business, the board has commenced with a formal due diligence. “Upon completion of this process, including the submission of binding offers by potential buyers, all disposal options will be further evaluated,” Tiger Brands said.  

Tiger Brands also announced that it has decided to close its deli foods business in Nigeria “following a thorough evaluation of all alternatives”.

“Despite significant management effort, the business continued to incur losses,” Tiger Brands said. The closure is expected to be finalised in the next few months.

The company said the effect of the closure on its net asset value and headline earnings is not material.

njobenis@businesslive.co.za