The new joint venture, known as the Famous Brands Cheese Manufacturing Company‚ will be entirely independent from the existing dairy business.
Famous Brands will control 51% of the company with shareholders of Coega Dairy holding the balance.
In terms of the agreement‚ a new state-of-the-art cheese manufacturing plant will be constructed adjacent to Coega Dairy´s existing operation‚ where it produces long life milk and butter.
Coega Dairy will supply milk to the new company‚ which in turn will produce Mozzarella‚ cheese slices and cheese spread for the group.
Debonairs Pizza will initially be the company´s biggest customer but in time cheese will be supplied to other brands in the Famous Brands stable.
"We have signalled to the market that our goal is to grow the back-end of the business by enhancing our manufacturing capability and capacity‚ and this is another strategic step in that process‚" said Famous Brands chief executive Kevin Hedderwick.
"This partnership is compelling for two reasons: Firstly the transaction is a greenfield investment with significant earnings potential and a short payback period and, secondly, it will deliver tremendous benefits for farmers who are partners with us through Coega Dairy. These farmers gain an instant‚ robust market for their products with the potential to grow that market over time‚" he added.
Coega Dairy's ownership comprises 19 producer shareholder farms‚ of which six are community and black-owned. The 225 farm employees employed by the shareholder farms are all historically disadvantaged individuals‚ as are Coega Dairy´s factory employees. They are also all shareholders in the dairy through the Coega Dairy Empowerment Trust‚ which has been funded by the Industrial Development Corporation.
Equipment worth about R35m will be imported from Italy for the custom-designed plant and will be funded by the joint-venture partners in proportion to their shareholding.
Coega Dairy will manage the day-to-day operations of the cheese manufacturing business.
In terms of the agreement‚ the Coega Development Corporation (CDC) will build the facility and lease the premises to the new company. Construction is due to start in November and cost R20m.
"By locating this business within the CDC node‚ which was specifically set up by government to attract investment‚ Famous Brands is helping to contribute to the economy of the Eastern Cape‚ one of the poorest provinces in the country. We are delighted to be able to make a meaningful difference in an area of real need‚" said Hedderwick.
"Significantly the new venture will create 49 jobs in the manufacturing plant as well as a further five jobs in the existing Coega Dairy business‚" he added.
Coega Dairy chief executive Dr Hennie Kleynhans said the transaction is a fantastic coup for the farmers who own Coega Dairy. "It guarantees a market for at least 38 million litres of milk a year and will, in time, establish the dairy as one of the largest milk producers in the country," he said.
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