Pioneer expresses interest in KWV

Fresh from concluding a deal with the Competition Commission, Pioneer Foods is now contemplating making a bid for the country’s second largest wine and spirit company, KWV Holdings.

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Pioneer Foods managing director André Hanekom said negotiations were continuing and would take some time. With the move coming on the heels of a substantial fine from the Competition Commission, there are questions as to whether Pioneer has the cash to finance the deal, which is rumoured to be worth R800 million.

But Hanekom said Pioneer was still determining a value. “We are in discussions with the banks to make sure we can afford it,” he added. Sanlam Private Investments portfolio manager David Botes said talk about the merger was premature, but the deal could possibly take the form of issuing KWV shareholders with shares in Pioneer Foods.

“KWV is trading at a huge discount to its nett asset value, so it will be interesting to see what Pioneer offers,” he said. Botes also questioned whether the two companies would make a good fit. “It’s like Truworths and Farm City merging. It’s totally out of the food and beverages industry and going more into the wine industry. Pioneer’s distribution outlets do not necessarily have liquor licences, so I can’t see that it will work 100%.”

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Hanekom said there were three main reasons why Pioneer, which has a vast distribution network in South Africa for its food brands, is interested in KWV. “KWV has well-known brands in Africa, and you don’t often get the opportunity to buy old brands. They also have a fairly large footprint in terms of exports. KWV is strong in some countries, where we’re not so strong, so that will help us by giving us a larger export base.

“We already export to more than 100 countries and we have a footprint in terms of distribution and merchandising. We’re in the same stores as KWV already, so there are some synergies we can unlock, such as saving costs by sharing infrastructure. “That’s why we’re still busy, to see if it’s possible to unlock the things that we want to unlock.”