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Rhodes Food Group to buy instant food maker

Cape Town - Rhodes Food Group (RFG) [JSE:RFG] said on Tuesday it intends acquiring 100% of Durban-based instant food maker Pakco for R200m by January 1 2017.

The manufacturer of spices, condiments, instant meals and complementary products includes brands such as Bisto gravy.

Pakco manufactures, packs and distributes dry packed, bottled and canned foods under its own brands and private label.

The products are stocked by major retailers, wholesalers and independent stores in South Africa and exported to eight neighbouring African states.

“The board of directors of RFG believes the acquisition presents an attractive investment opportunity, which is aligned with Rhodes Food's strategy of expanding its business operations through value accretive acquisitions,” it said in a statement.

Accretive acquisitions increase an acquiring company’s earnings per share, as the price paid for the new business is lower than the boost it is expected to provide, according to Investopedia.

“This acquisition will enhance Rhodes Food's position in the canned foods as well as the salads and pickles categories, while the dry-packed products offer the opportunity to enter into a new category in keeping with its strategy of lateral extensions into adjacent categories,” the company said.

Pakco's net asset value at the end of its last financial year (December 31 2015) was R83m, while earnings before interest, tax, depreciation and amortisation amounted to R9.5m on revenue of R221.5m, RFG said.

The acquisition is dependent on a variety of conditions being met, RFG indicated.

Rhodes shares were trading at R27.25 on the JSE, with a price/earnings ratio of 27.17.

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