The proposal was announced late on Thursday (5 September)‚ only a day after agricultural conglomerate Afgri disclosed devastating losses from its poultry business and warned of a crisis in the local chicken industry.
Pioneer financial director Leon Cronjé said the unbundling and separate listing of Quantum - subject to "any other acceptable corporate action" - would happen in the next 12 months.
The reference to corporate action is intriguing since ongoing market speculation has matched Quantum with Afgri's poultry division.
Asked whether any corporate action might transpire prior to the unbundling and separate listing‚ Cronjé would only say that "12 months is a long time". Quantum sells eggs‚ chicken products‚ animal feed and commercial laying hens.
Quantum would be treated as an "asset-held-for-sale" with Cronjé saying that from next month the business would be ring fenced as a separate legal entity. The unbundling is largely seen as the first strategic shift at Pioneer since former Tiger Brands executive‚ Phil Roux‚ took the reins Pioneer's chief executive.
A market analyst‚ who wished to remain anonymous‚ argued Roux was probably more comfortable building on Pioneer's branded business segments - which include Sasko (bread) and Bokomo (cereals).
Initial market reaction to Pioneer's proposals were cynical‚ with some market analysts suggesting the move was a desperate capitulation from the profit-plucked poultry sector.
In the year to March this year‚ Quantum managed to hike revenue 16% to R1.8bn but operating profits slumped R33m into the red. Chicken accounted for 37% of revenue and eggs another 23%.
But Coronation Fund Managers expert Alistair Lea reckoned Pioneer's proposals were a good idea. "The main attraction at Pioneer is undoubtedly the brand business like Sasko and Bokomo‚ and the company will get a higher rating by removing what is in effect a big discount on the company," Lea said.
Lea also argued that it was more prudent for Pioneer to offer shareholders shares in Quantum than trying to sell a poultry business at the bottom of the cycle. "Shareholders have a choice whether to stay invested at this low point of the poultry cycle‚ or to get out," he added.
This is not the first time a food brands conglomerate has unbundled a poultry business. Tiger Brands unbundled Astral Foods in 2001‚ a move that unlocked huge value for longer-term shareholders.
Source: Financial Mail via I-Net Bridge
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