Premier takes ties with Brait to next level

The move, which comes just months after Brait announced its 49.9% stake in Premier, could see the unlisted food producer start to compete more aggressively against JSE-listed rivals Tiger Brands, AVI and Pioneer Foods.

Boosted by improved access to capital, Premier, which manufactures brands such as Blue Ribbon bread and Snowflake flour, said it would be spending R500m on capex plans primarily for its baking facilities, which could see the company move into new categories such as biscuits.

It would also broaden its basket by seeking mergers and acquisitions, Premier Foods CEO Ian Visser said yesterday.

"There will be product extensions and new product categories. We want Snowflake flour to be associated with everything to do with baking, which could see us move into finished goods such as biscuits," he said.

He said the company had already identified countries in Africa for expansion.

Consolidation would take place in the food sector, which would see fewer players but larger companies, Visser said.

"Improved access to capital has many positives for Premier Foods at both an operational and strategic level as we continue to roll out initiatives that will enhance our competitiveness in the long term."

Brait has the option to increase its stake in the group from 49.9% to up to 80% over the next five years by acquiring shares from members of Premier Foods' management. The remaining 20% will stay in the control of staff and management of the group.

Visser said: "The restructuring also enables certain members of Premier Foods' management, who participated in the initial management buy-out in 2007, to monetise their holding in the group and exit their roles over the coming months."

Brait Private Equity CEO John Gnodde said: "Following our successful capital raising earlier this month, this further investment is aligned to Brait's revised business model to realise primary organic growth through anchor investments in high-quality companies such as Premier Foods and Pepkor."

Visser will take on the role of group CEO while the CEO position of the operational company will be assumed by Tjaart Kruger, who will oversee all milling and baking operations.

Investec Securities analyst Anthony Geard said it was difficult to see how much consolidation could happen in the food sector. "The industry is already quite consolidated at the moment. All of the major companies have been looking for acquisitions but there haven't been many opportunities for that to happen.

"It is not impossible to have a profitable bread business but it does need a lot of investment in manufacturing, product range, branding and distribution," Geard said.

Source: Business Day