R8bn food mega-merger on cards

Johannesburg - South African food group Tiger Brands (TBS) said on Monday it is considering making a cash and share offer for AVI of R24 per share, implying a total equity value for AVI of R8bn.

This represents a 62% premium to AVI's share price and to the 30-day volume weighted average trading price.

The combined company will create a focused and balanced fast-moving consumer goods (FMCG) company and will result in a more efficient and effective platform from which to position the combined entity for accelerated growth, Tiger Brands said in a statement.

Peter Matlare, CEO of Tiger Brands, said: "Tiger Brands has followed AVI's progress with interest for some time. It is a high-quality company with an outstanding track record, good growth prospects and a management team held in high regard."

This combination would allow the merged entity to improve its global competitiveness to the benefit of consumers, customers and other stakeholders and will provide a stronger base to expand further into the rest of Africa, he added.

"The strategic rationale for the transaction is very compelling and provides an attractive value proposition for shareholders of both companies.

"We intend to achieve continuous improvement in costs and productivity as well as being committed to product innovation and appropriate brand investment," Matlare continued.

Under the terms of the proposed transaction, the offer price of R24 per share would be settled as to R14.40 in cash for every one AVI share and 6.989 Tiger Brands ordinary shares for every 100 AVI shares (based on an issue price of R137.35 per Tiger Brands share), allowing AVI shareholders to realise a substantial portion of their holding in cash and still providing the opportunity to participate in the benefits of the combined entity.

The proposed offer price would be increased by a notional interest amount based on the publicly quoted basic prime overdraft rate of interest per annum calculated from 31 January 2009 to 30 April 2009 and at prime plus 200 basis points from 1 May 2009 up until the date of payment.

"Tiger Brands has acquired 15.85 million shares in AVI on market, representing approximately 4.6 % of AVI's issued share capital," Matlare concluded.

Shareholders were advised to exercise caution in dealing in their securities until such time as a further announcement is made.

I-Net Bridge