April 18, 2007

Remgro to buy and delist South Africa's largest chicken integrator

South African investment company Remgro said it plans to buy out and delist Rainbow Chicken before it expands capacity in the company to meet growing poultry demand.

Rainbow Chicken is the top chicken integrator in South Africa, with R 4.1 billion (US$581 million) in revenue last year and profit before tax at R 588 million (US$83 million).

Remgro already owns 62 percent of Rainbow, but the investment company's chief executive, Thys Visser, said it would be difficult to take on the levels of debt required as a publicly traded company with ordinary shareholders.

Even as Remgro's R1.72 billion cash offer represents a 36 percent premium to the R11.60 closing price on the day before the delisting proposal, Oasis Asset Management, which owns a 7 percent stake in Rainbow, said the offer was too low.

Although Rainbow faces a short-term risk due to high maize prices currently, it is expected to substantially outperform the market over five to 10 years.

At the same time, investors have called for unbundling of some of Remgro's diversified investments. Remgro's investments range from that in tobacco firms, financial services, healthcare and platinum mining operations.