Famous Brands acquires Lamberts Bay Foods

LBF is one of only three French fries manufacturers in South Africa. The business has supplied products to Famous Brands for the past 20 years and has on several occasions been recognised as a Supplier of the Year in the group’s annual awards competition.

Lamberts Bay Foods was established in 1995 by Oceana, as a social responsibility project to offset job losses resulting from the decline in fishing employment opportunities in the region, and has subsequently matured into a viable commercial operation. Today, LBF is the single largest employer on the West Coast north of St Helena Bay, employing 305 people. In addition, approximately 2,250 jobs are created on a national scale through the LBF operation. LBF staff who are currently beneficiaries of the Oceana Empowerment Trust will not be affected by this transaction and will continue to receive their share of the benefits.

Kevin Hedderwick, Famous Brands’ group strategic advisor with responsibility for M&A activity, said: “Acquiring LBF is a major coup in terms of advancing the group’s stated goal to build capability and capacity across our logistics and manufacturing supply chain operations. This acquisition not only affords us security of supply of a key strategic menu item for our franchised network, it also provides us with an existing food services and retail customer base, which has significant expansion potential over time.”

Settled from cash reserves

The purchase consideration falls below the threshold of a categorised transaction in terms of the listings requirements of the JSE and will be settled from cash reserves. The transaction is subject to Competition Commission approval, whereafter all suspensive conditions will have been fulfilled.

“Famous Brands has enjoyed a long relationship with LBF, having been our biggest customer for a number of years,” commented Oceana's CEO, Francois Kuttel. “Our motivation to do this transaction with Famous Brands was our tacit recognition of their ability to maintain and grow LBF in line with their core business. The acquisition strengthens LBF’s potential for growth and enhances the long-term certainty of product off-take that only a company of Famous Brands’ market leading position can provide. I am confident that the future of the business is in very good hands and that LBF will continue to expand under Famous Brands’ expertise. This transaction enhances the long-term job security of the staff as well as the positive impact that the business has on the Lambert’s Bay Community,” added Kuttel.

Hedderwick commented: “Although the South African potato processing industry is growing rapidly to meet increasingly strong demand fuelled by the brisk growth in food services and the convenience market, it lags its peer industries in developed countries and illustrates the growth potential for the LBF business.”

Currently, LBF processes some 24,000 tonnes of potatoes per annum. Potatoes are sourced mainly from Mpumalanga, Limpopo, the Free State, and the Sandveld region of the Western Cape. Long-term relationships with growers close to Lambert’s Bay are one of the business’ key strategic advantages and, accordingly, an ongoing development initiative.

“The LBF plant operates according to best practice standards and is regarded by customers as having the lowest product-defect level in the industry,” noted Hedderwick. “Quality Assurance is at a very high level. The facility has been awarded the SANS 10330 (HACCP) accreditation, it follows FSA Audit Guidelines, and complies with industry benchmarks, FSSC 2000 as well as GFSI,” he added.

Identified opportunities

Hedderwick elaborated: “Our goal is to ensure continued quality and consistency of product for all of LBF’s customers. The existing operation has a good record of accomplishment and is well respected and supported. The plant integrity and condition is exceptional, and while we have identified opportunities to enhance and up-scale the business, there is no intention to move the facility, or alter arrangements with LBF’s employees or growers. They are key contributors to the success of LBF and we look forward to welcoming them into our group.”

Kuttel added: “We are delighted that this transaction will benefit all parties. Given Famous Brands’ extensive experience in managing supply chain businesses, we are confident that they will unlock further value for all stakeholders.”

Hedderwick concluded: “Famous Brands’ management has set an audacious operating profit target of R1bn by February 2018 – this acquisition will make an important contribution to achieving that goal.”