Fishing group Sea Harvest will dramatically diversify its food brands basket after mooting a large investment in the local dairy sector.
The group, which is controlled by empowerment entity Brimstone, said on Tuesday it would acquire Ladismith Cheese Company for R527m.
Sea Harvest CEO Felix Ratheb said Ladismith Cheese would provide Sea Harvest with an ideal platform to build on in the dairy sector through the development and acquisition of additional dairy and allied beverage products. "We are looking to build a bigger black- controlled food company."
The deal follows on the heels of Sea Harvest’s R885m acquisition of the Viking fishing Group and 50% of Viking Aquaculture.
While the move into the dairy sector might surprise investors, Sea Harvest has long harboured ambitions to play in the broader food sector. Initial tilts at diversification were made in the form of distributing frozen vegetarian and vegan meals, while Australian seafood subsidiary Mareterram is also involved in food distribution outside of the fishing sector.
Market sources said Sea Harvest’s shift into new food lines was possibly prompted by a realisation that there were limited opportunities in the fast consolidating local fishing sector.
Western Cape-based Ladismith Cheese produces and distributes cheese, butter and milk powders to the South African retail, wholesale and food service markets.
The company produced 9,000 tons of cheese and butter and 7,500 tons of dairy and nondairy powder to generate R681m in revenue and R58m in after tax profits for the financial year to January 2018.
Ratheb said the Ladismith Cheese acquisition formed part of the fishing group’s strategy to grow organically through additional volumes and margin enhancement. He said Sea Harvest would pursue acquisitions in complementary sectors of the South African food and agricultural industries, especially those segments exhibiting strong fundamentals and growth that would allow the group to leverage its core competencies and strengths.
Sea Harvest is best known for its eponymous hake brand, which is a market leader in the local frozen fish category.
Ratheb said the Ladismith Cheese acquisition offered Sea Harvest a profitable branded fast moving consumer goods manufacturer of significant scale. "It’s not that different from fishing. Both companies are involved in processing, and we understand flow lines and yields. The customers are also similar," he said.
Ratheb said that the dairy sector was expected to see growing demand for cheese and butter as consumer dietary habits changed towards natural fat products.
The proposed Ladismith deal will be settled in cash, but Sea Harvest intends undertaking a vendor placement of up to R300m worth of its shares with majority shareholder Brimstone to part fund the transaction.
Sea Harvest indicated that the new shares would be placed with Brimstone at about R14 per share.