Picture: REUTERS
Picture: REUTERS

North West co-operative NWK is returning to its core maize business following a spate of acquisitions in recent years that wiped out substantial shareholder value.

The 4AX-listed entity has sold its chicken and animal feed businesses, Opti Agri, to Country Bird Holdings (CBH) for R296.4m.

Anthony Clark of Vunani Securities said NWK had not been successful in its bid to diversify away from its core maize business and that it had been faced with substantial write-downs and losses in the past two years. NWK’s current share price of 350c is about a third of its net asset value of 977c a share.

"The poultry division has not fared well for NWK over the past two years," said Clark, who described the transaction as a smart move for both parties. He urged NWK to continue to clean up its portfolio and focus on its core operation.

Clark said NWK had been a disastrous investment. "The share price has halved over the past four years to the current level of 350c, while the sector and its comparative stocks of Kaap Agri and Senwes have performed substantially better."

CBH CEO Marthinus Stander said he was excited about the acquisition, which was not expected to lead to job losses.

Opti Agri is a broiler producer based in Lichtenburg in the North West province.

It produces day-old broilers, which are chickens bred specifically for meat, and manufactures a wide range of animal feeds. It supplies the animal feed to a network of merchants and distributors as well as to end producers.

CBH was embroiled in a prolonged high-profile battle for control of chicken producer Sovereign Foods during 2016.

After building up a 34% stake, CBH was forced to abandon an offer it had made because it had transgressed the takeover regulations. Sovereign was subsequently taken over by a private equity firm.