South Africa’s largest food producer sells fruit business for R1

Tiger Brands has announced its intention to sell its deciduous fruit business, Langeberg & Ashton Foods (LAF), for R1 to a consortium of investors, with plans to establish a community trust.

Tiger Brands, South Africa’s largest food producer, reopened this sale in December 2022, when its management revisited all options to ascertain LAF’s commercial viability and sustainability.

The company explained that it has gone to considerable effort to ensure a responsible exit from the business, given the economic importance of this iconic business in the region, employing over 3,000 permanent and seasonal staff.

Now, Tiger Brands, through its subsidiary Tiger Consumer Brands, has entered into a sale of business agreement for LAF’s disposal as a going concern. 

The sale is to a consortium comprising parties with a vested interest in the sustainability of LAF and a local co-operative of fruit growers in the Ashton region, who bring agricultural sector expertise and insights.

Specifically, the consortium consists of the Ashton Fruit Producers Co-operative, as well as a development finance institution with a mandate for job creation, improving livelihoods and supporting the transition to net zero. 

The Ashton Fruit Producers Co-operative comprises member producers from the Robertson, Ceres, Breederivier and Klein Karoo areas.

Tiger Brands explained that most of LAF’s products are exported to markets in Europe and Asia, outside the company’s identified strategic markets.

In addition, due to the business’ seasonal nature, the average working capital requirements remain relatively high at approximately R900 million annually, and the unwinding of this working capital will further optimise Tiger Brands’ operating cash flows.

Therefore, Tiger Consumer Brands will sell LAF as a going concern for a total cash consideration of R1 to a newly formed company established by the consortium. 

In addition, Tiger Consumer Brands will commit R150 million towards the establishment of a Community Trust aimed at socio-economic development initiatives benefiting the broader Langeberg Community. 

Tiger Consumer Brands’ R150 million commitment will enable the Community Trust to subscribe for and beneficially hold a 10% shareholding in LAF through the consortium’s newly formed company, while the consortium retains the balance of the equity.

In addition to establishing this trust, Tiger Brands has also committed to completing an effluent plant upgrade with a further investment of R31 million. 

“This will ensure that LAF continues to adhere to environmental regulations and is in line with our values of being a responsible corporate citizen,” Tiger Brands explained.

It added that the conclusion of this transaction marks a significant milestone in the company’s portfolio optimisation strategy.

Tiger Brands said this will enable its management to deploy capital and allow focus on categories that meet the company’s financial hurdles in terms of its capital allocation framework.

“This will ultimately enable greater focus on the core business to ensure the delivery of sustainable growth,” it said.