RFG Foods Acquires Halaal Manufacturer, Ali BaBa Foods

Introduction and overview

Shareholders are advised that the Company’s wholly owned subsidiary, RFG Foods Proprietary Limited (“Rhodes Food”) and Ali BaBa Foods have entered into an agreement (“Agreement”) dated 30 October 2015 in terms of which Rhodes Food will acquire the business assets of Ali BaBa (“the Acquisition”).

Description of the business carried on by Ali BaBa Foods

Ali BaBa, based in Athlone, Cape Town, manufactures a range of halaal Eastern food products. Its product range includes samoosas, pies and rooties. These products are sold to all major South African food retailers, forecourt bakery outlets and independent traders.

Rationale for the Acquisition

The board of RFG is of the opinion that the Acquisition presents an attractive investment opportunity which is aligned with RFG’s strategy of expanding its business operations through value accretive acquisitions. This Acquisition will further strengthen Rhodes Food’s position in the bakery and snacking category, particularly in the convenience channel. Ali BaBa will complement the group’s existing pies and pastries business, and its newly acquired confectionery business from General Mills South Africa.

Purchase consideration and effective date

The purchase consideration payable by Rhodes Food to Ali BaBa Foods is R42 000 000 (forty two million rand). The effective date of the Acquisition is 1 February 2016.

Conditions precedent

The implementation of the Acquisition is subject to the following conditions precedent:

  • that those employees of Ali BaBa who have elected to remain employed with Ali BaBa and who will therefore not be transferring to Rhodes Food, sign a waiver as contemplated in section 197(6) of the Labour Relations Act (66 of 1995), and that Ali BaBa provides Rhodes Food with a copy of such signed waivers on or before 31 January 2016;
  • that a comprehensive due diligence investigation is completed by Rhodes Food on or before 4 December 2015 and Rhodes Food is satisfied with the result of such investigation in its sole and absolute discretion (“Due Diligence Condition”);
  • that the board of directors of RFG approves the Acquisition subsequent to the fulfilment of the Due Diligence Condition and Rhodes Food provides a copy of such approval to Ali BaBa on or before 31 January 2016; and
  • that Ali BaBa furnishes Rhodes Food with a copy of a special resolution passed by the shareholders of Ali BaBa approving the Acquisition, as required in terms of section 112 (read with section 115) of the Companies Act (71 of 2008) on or before 31 January 2016.

Ali Baba’s net asset value at the end of its last financial year (28 February 2015) was R10.990 million. EBITDA for the financial year ended 28 February 2015 amounted to R6.172 million on revenue of R48.206 million.

Classification of the transaction

The Acquisition does not constitute a categorised transaction in terms of the JSE Listings Requirements and this announcement is therefore made on a voluntary basis.