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Takeover target Clover set to go global

Consortium makes generous buyout offer – ‘to convince shareholders’.

Consumer goods group Clover Industries has received a buyout offer from a syndicate of companies, including Israel’s Central Bottling Company (CBC), that could see its dairy business expand into new, international markets.

The deal, which values Clover at R4.8 billion and is still to be evaluated by an independent board, pushed the company’s share price up by 21% on Monday.

Milco – formed to act as ‘offeror’ for the transaction – consists of International Beer Breweries (59.5%), JSE-listed Brimstone Investment (15%), IncuBev (8.3%) and Ploughshare Investments (10.9%).

As International Beer Breweries is a directly owned subsidiary of CBC, the deal is set to open Clover up to international franchisors, including the Coca-Cola Company, Carlsberg, the Müller Group and Diageo in a bid to capture the African market.

“This is the way that we operate across the world,” says Aran Oelsner, CEO of CBC Group International. “We are always looking for local partners that will give us guidance, so we built the consortium that will give us the experience and fund the expertise we have in the dairy business.” Oelsner himself ran a dairy for 10 years.

Clover said in a statement that Milco intends to combine its capabilities with those of Clover to unlock value through key strategic initiatives, primarily aimed at accelerating sales, distribution and efficiency opportunities within Clover’s products.

SA dairy on European shelves

The deal comes at a time when the continent is attracting numerous franchising deals, with Milco confirming that a deal with the Müller Group is on the table should the transaction be completed. “One of the opportunities we present is a long-term relationship with the Müller Group, which is the second-largest dairy group in Europe,” says Oelsner, who affirmed that this is an opportunity to have South African dairy products on European retail shelves.

CBC, Israel’s leading manufacturer and distributor of beverages, has operations in Turkey, Romania and Uzbekistan, and also owns Israel’s second largest milk processing dairy, Tara.

Milco’s 25% premium to Friday’s R20 closing price for Clover shareholders is subject to adjustment if Clover declares dividends, making it a generous offer given the turbulent year JSE companies endured in 2018. However, Milco believes this is an adequate offer given the growth potential Clover presents. “We believe in the economy and the brand, so [we] decided to give a generous offer that would convince the shareholders to go with us,” says Oelsner.

Clover Industries

Milco is set to bolster Clover’s presence in South Africa by intensifying its distribution in low earning markets in addition to looking at expansion across the region. “The company [Clover] was running well but we can see some opportunities, especially in townships and for point-of-sale retailers that are not getting service direct from the company,” says Oelsner. “Currently, Clover has 10% of its sales outside South Africa but we are ready to see which countries to enter after we seal the deal.”

Clover announced that the agreement with Milco to acquire all of the issued shares in Clover on a fully diluted basis has a ‘break fee’ caveat. “As more fully set out in the IA [implementation agreement], where the scheme does not proceed or fails, Clover undertakes to pay Milco a break fee equal to 1% of the scheme consideration,” said the letter to shareholders.

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Clover would pay Milco a break fee??

It sounds like Clover was soliciting?

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