Bidvest can tap over R13bn for acquisitions outside SA

Johannesburg - Bidvest Group [JSE:BVT] is seeking deals outside its South African home market and could borrow as much as $1bn (R13.36bn) for acquisitions after it spun off its food-services unit last year, its chief executive officer said.

Lindsay Ralphs, the CEO, is plotting Bidvest’s next phase of growth after the Johannesburg-based company spun off Bid Corporation, which is about 40% larger by market capitalisation at R80bn.

Now operating a mix of mostly South African businesses ranging from cleaning, security and freight-services to car rental and plumbing supplies, Bidvest sees its scope for local acquisitions as limited, the CEO said.

There are a “couple of processes taking place” related to potential acquisitions, with expansion in the UK a possibility, Ralphs, 61, said in an interview at Bloomberg’s Johannesburg office on Tuesday.

Any deal would be in an industry in which Bidvest already operates and the company would want to be a major competitor in any new market, he said.

“It probably reduces down to three, four or five significant industries that are simple and sometimes even below the radar,” said Ralphs.

Money would be borrowed outside South Africa, with overseas purchases serving to hedge against volatility in the rand, he said.

The currency lost 45% of its value against the dollar in the three years through 2015 before gaining 13% last year.

Other South African companies are expanding in international markets to counter an unpredictable local currency and 2016 economic growth that the central bank said was likely to have been the slowest in seven years.

Clothing retailer The Foschini Group [JSE:TFG] and investment company Brait [JSE:BAT] have bought firms in the UK, while Bid Corp [JSE:BID] and auto-to-logistics firm Imperial Holdings have substantial foreign operations.

The spin off has been a success for the new Bidvest, Ralphs said. Previously, cash generated by the company was largely put toward growing the food-services unit. The split frees up funds for growing the remaining businesses.

Ralphs replaced Brian Joffe, who founded the company in 1988 and retired as CEO when Bid Corp was separated in May. Joffe remains a non-executive director of Bidvest and is chairperson of Bid Corp.

After adjusting historical pricing to reflect the spin off, Bidvest has gained 63% in the past 12 months, according to data compiled by Bloomberg, making it the third-best performer on the FTSE/JSE Top40 Index and the top non-mining stock.

Without the historical adjustment, Bidvest has declined 49%.