Board changes likely at owner of Denny Mushrooms brand
Private equity firm Actis buys 37% stake in Libstar
Libstar, the investment holding company that owns the Denny Mushrooms, Goldcrest and Lancewood brands, on Monday said there could be board changes after private equity firm Actis bought a 37.02% stake in the company.
Actis, which describes itself as an investor in growth markets across Africa, Asia and Latin America, last month acquired two private equity funds: Abraaj Private Equity Fund IV (APEF IV), a global buyout fund, and Abraaj Africa Fund III (AAF III), a fund for investment in sub-Saharan Africa.
Libstar is a portfolio investment of APEF Pacific Mauritius, which in turn is a portfolio investment of APEF IV and AAF III. APEF Mauritius owns 37.02% of Libstar.
“In the context of the change of management rights on APEF IV and AAF III, shareholders are advised that Wahid Hamid has resigned as a nonexecutive director of Libstar, chair of the remuneration committee and member of the investment committee with effect from August 12,” Libstar said in a statement.
It said its nomination committee would begin an assessment of the structure and composition of the board and its committees “and advise shareholders of the outcome of this assessment in due course”.
The Dubai-based Abraaj filed for provisional liquidation in June 2018 after investors in its $1bn health-care fund, who included the Bill and Melinda Gates Foundation and the International Finance Corporation, expressed concerns over alleged misuse of funds.
Anthony Clark, an independent analyst from Small Talk Daily, said he held Libstar in high regard but noted that the company’s share price is likely to struggle to surpass R12.50 — Libstar's listing share price on the JSE in May 2018 — because of market distrust of Actis’s long-term intentions with the investment in the firm.
“The market may be concerned that [Actis] will want to sell down the stake to get back the money. As it stands [on Monday afternoon], the share price is R8.44. I have a buy on Libstar. It is possibly one of the best-valued food companies,” Clark said.
Meanwhile, Libstar said on Monday it managed solid volume growth for its core product offerings in the six months to end-June, but accounting changes will weigh somewhat on its interim headline earnings per share (Heps) growth.
Heps for the period is expected to rise 45%-55% after the accounting changes, the group said. Without the new accounting rules, Heps would have risen 78.4%.
The group reported gross organic revenue growth of 4.5% during the period, saying changes in its sales mix of value-added dairy products were favourable.
Core categories, which represent 88% of group revenue, are expected to deliver revenue and volume growth in the mid single digits, the company said. This is mainly due to strong performances in dry condiments, snacks and confectionery, and baking and baking aids.
Libstar’s revenue growth was a bit underwhelming compared to recent updates, Clark said, but the company seemed on track for a solid second half of its financial year.
“In this environment for any company to show margin improvement and increase core growth in key categories ... many other companies such as Pioneer Foods or AVI would kill for numbers like this,” said Clark.