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DealMakers - 2019 Annual

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Deal of the Year

PepsiCo secures African foothold

The acquisition of all outstanding shares of Pioneer Food Group, the maker of well-known brands such as Weet-Bix, Liqui-Fruit and Safari, for R110 per share (plus dividends of between R2.19 - R3.24 per share depending on certain circumstances) represented a premium of 56.5% as of July 12. The R23,63bn transaction, one of PepsiCo’s largest acquisitions outside the US,  is a vote of confidence in the South African economy, despite the political and socio-economic risks. 

Agribusiness, Zeder Investments, Pioneer Foods’ largest shareholder with a 28.6% stake, will receive R6,41bn from the proceeds of the sale and will return between R4.25bn and R4.75bn of this to shareholders.


The deal is good for both parties; for PepsiCo it is credit positive, expanding the company’s growth opportunities while not materially increasing its financial leverage. The deal was funded through a combination of debt and cash. The acquisition represents a differentiated opportunity for PepsiCo, allowing it to immediately scale its business in Africa by providing a new platform for growth, identifying South Africa as a hub for expansion throughout the continent. Pioneer exports to more than 80 countries, through joint venture operations in Namibia, Botswana, Kenya and Nigeria.

Through PepsiCo’s global footprint, Pioneer Foods will have access to new markets, and the opportunity to improve its ability to compete more effectively on the African continent and beyond with access to leading research and develop-ment, and brand expertise. The deal comes at a time when the company’s bottom line has been under pressure from higher maize prices, as a result of the drought and weak consumer demand.
A new operating sector will be established by PepsiCo for sub-Saharan Africa which will remain, from a financial reporting perspective, part of Europe Sub-Saharan Africa (ESSA). 

PepsiCo committed to support the broad socio-economic imperatives of employment, and talent development that will benefit local suppliers. Its sustainable farming programme in Africa will benefit local farmers in Pioneer Foods’ communities, and help to create new opportunities for South Africans through the country’s agricultural supply chain. 

The transaction required the approval of a number of competition authorities – in Africa from the competition authorities in SA, Botswana, Kenya, Namibia, Nigeria and the COMESA Competition Commission. In addition, the competition authorities in Cyprus, Germany, the UK and Vietnam were required to approve the transaction. 

Local Advisers

Financial Advisers: PSG Capital, UBS, JPMorgan
Sponsors: PSG Capital
Legal Advisers: Webber Wentzel, Bowmans
Transactional Support Services: BDO, PwC

Comment from the Independent Panel:  

The deal is the type of FDI everyone in SA has been looking for, and credit to management for the way they have run the business for many years. A large multi-national investing this way is not just good news for exiting shareholders (who received a good premium) but also for SA Inc and the President’s investment drive.

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Pick of the best in alphabetical order

Clover buyout transformational to the business and the local industry


In September 2019, a consortium of local and international strategic investors with strong local partners (Milco SA) concluded an all-cash offer of R25 per share (representing a 25% premium to price on the day prior to the announcement) to acquire 100% of Clover Industries, valuing the company at R4,8bn.

The international strategic investor consortium, comprising Central Bottling Company (CBC) through its wholly-owned subsidiary International Beer Breweries (Israel), IncuBev (Mauritius), Ploughshare Investments, and the management of Clover, initially entered into an agreement in February, with Brimstone Investment as its broad-based black economic empowerment partner – with a 15% shareholding in Milco SA. Mid-transaction, Brimstone withdrew its participation, bending to pressure from human rights and Palestinian-solidarity organisation BDS South Africa, resulting in the need to re-constitute the consortium and negotiate a replacement for Brimstone as BEE partner. In July, Milco SA announced that BEEMilk, representing a consortium of investors comprising Khulasande Capital III, Global Capital Empowerment Fund and Ubisi, had acquired the 15% stake in Milco SA.


Clover, historically a co-operative owned entirely by dairy farmers who grew it into a leading business, was listed on the JSE in December 2010. Capital raised was used to grow the company from its fundamental dairy base, becoming the largest publicly traded dairy-products manufacturer with one of the largest ambient and chilled distribution networks in Southern Africa. With a footprint across South Africa and sub-Saharan Africa, the deal will impact not only the local industry, but also regionally as the company expands its presence in East African countries including Kenya, Tanzania and Malawi. Locally, the transaction will be transformational to the business and the local industry – the investment in technology and the development of new products to increase market share will help to compensate where consumer spending has declined over the years.


Transaction negotiations, which began in earnest in May 2018, were subject to stringent conditions by authorities, including the protection of jobs, local procurement and information-sharing stipulations. Further structuring and implementation complexities in a constrained and regulated timeline to completion were created by the exit of Brimstone. The international consortium of parties undertook a complex multi-jurisdictional capital raise to buy-out. The funding, structuring and implementation of the deal involved multivariate consideration to craft a robust implementation mechanism catering for all the investing parties involved, while co-ordinating various international funding banks.

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Comment from the Independent Panel:  

The new controlling shareholder will add interesting new technology and product lines to the business and encourage growth in tough macro-environments. Exiting Clover shareholders benefitted from a good premium to market price pre announcement of the deal.

Local Advisers

Financial Advisers: Rand Merchant Bank (to Milco), Nedbank CIB (to Brimstone)
Sponsors: Nedbank CIB (to Brimstone), Rand Merchant Bank (to Clover)
Legal Advisers: ENSafrica (to Milco and Clover); Cliffe Dekker Hofmeyr (to Milco), Webber Wentzel (to BEEMilk), Bernadt, Vukic, Potash and Getz (to Brimstone), Werksmans (to Clover), Herbert Smith Freehills South Africa (to Clover)
Transactional Support Services: PwC

Strengthening Implat’s competitive positioning


The acquisition of the Canadian-based primary platinum group metal producer, North American Palladium (NAP), valued at R11,4bn (C$1bn), is in line with Implat’s strategy to reduce costs and stream-line operations, in order

 to improve its competitiveness in the global market.


Minority shareholders of the TSX-listed company received a cash consider-ation of C$19.74 per share, while majority shareholder (c. 81% of the common shares outstanding), an affiliate of Brookfield Partners, received C$16.00 per share, implying a blended offer price of C$16.77 per share. The offer will be settled via a combination of existing cash of $288m, cash raised through a metal pre-payment of excess inventory of $120m, and a bridging loan of $350 million which will be replaced by various complex alternative refinancing mechanisms.


NAP wholly owns and operates the Lac des Iles Mine northwest of Thunder Bay, Ontario and also has an ownership in two Canadian exploration properties, the Sunday Lake Project and Shebandowan Joint Venture. Implats and NAP had an existing relation-ship through the prospective Sunday Lake Project; in August 2019, NAP exercised its earn-in option to acquire a 51% interest in the project from Implats. 

The transaction minimises the Group’s reliance on SA for the bulk of its revenues, expediting its transition to become a multinational producer, and allowing the company to capitalise on expected medium-term deficits in the palladium market. While the deal is seen by some analysts as expensive, (given that NAP had not made a profit for 15 years before the palladium price exceeded $1,400), with shareholders of American Palladium the winners in the deal, the move into Canada is a hedge against some of the socio-economic, political and structural risks faced in the current jurisdictions. Given the rally in palladium prices seen over the past few years, the move is financially astute. Implats derives some 70% of its production from SA and the balance from Zimbabwe; these mines are deep level and labour intensive, with little to no scope to mechanise and lower costs. The Canadian mine, on the other hand, has a long mine life potential, is shallow, mechanised and labour light – it generated cash margins of 53% in the 12 months to June 2019. 

Comment from the Independent Panel:  

Diversification coming from different geographies is good for Impala shareholders who should benefit from the bullish views on palladium. The fund raising process was also impressive. The deal follows the “footsteps” of Sibanye in its acquisition of Stillwater. 

Local Advisers

Financial Advisers: Macquarie Advisory and Capital Markets South Africa

Sponsors: Nedbank CIB

Legal Advisers: Baker McKenzie; Webber Wentzel (to North American Palladium)

Unlocking shareholder value

The two-step transaction by Naspers, one of several over the past few years, formed part of its strategy, driven by pressure from investors to reduce the sum of the parts (SOTP) discount – a function the company has blamed largely on its having outgrown the JSE.


The unbundling and listing of Prosus on the Euronext Amsterdam, and a secondary inward listing on the JSE (with an opening market capitalisation on the JSE of R1,95 trn), created the largest consumer internet company in Europe, providing a significantly broader set of investors with direct access to its unique portfolio of high-growth international internet assets. 

The new platform created to hold Naspers’ technology assets (stakes in some 40 companies with investments in online classifieds, food delivery, payments, education and social) was partly unbundled to shareholders, with Naspers retaining a 73% stake in Prosus at listing. Existing shareholders had to decide whether they wanted a direct or indirect exposure to the new entity. A free float was created by Naspers through a capitalisation issue of Prosus shares issued as Naspers "M" shares. Shareholders were given the option to convert these shares to Prosus shares, or receive additional Naspers shares. The caveat for those who chose Prosus was that although the share may have upside, their fortunes were the subject of an immediate capital gains tax hit.    

One reason for the discount is Naspers’ heavy weighting on the Johannesburg Stock Exchange. Prior to the unbundling of the technology assets, the Naspers stock represented around a quarter of the value of the shareholder-weighted top 40 index, making it difficult for index investors attempting to limit their exposure to a single share. The Prosus listing should see a quarter of Naspers’ value move to Amsterdam.

It was a landmark and transformational deal of extraordinary magnitude, with an impact on entire markets and a multitude of disciplines. Before listing Prosus, extensive consultations took place over eight months to determine the optimal manner in which the secondary, inward listing of the company on the JSE could be executed in the interest of all stakeholders and investors.

The transaction was contemplated and executed over three and a half years, and was the final step in a series of strategic transactions which included the sale of a 2% stake in Tencent, and the unbundling of MultiChoice.

Comment from the Independent Panel:  A well executed and complex transaction that will hope-fully result in the holding company discount on Naspers’ underlying portfolio. It will also assist in reducing the heavy weighting of Naspers in JSE index tracker funds.

Local Advisers

For the unbundling
Financial Advisers: Morgan Stanley
Sponsors: Investec Bank
Legal Advisers: Webber Wentzel, Glyn Marais

For the listing
Financial Advisers: Morgan Stanley, Merrill Lynch, JPMorgan, Goldman Sachs, Citigroup Global Markets
Sponsors: Investec Bank
Legal Advisers: Webber Wentzel, Glyn Maris
Transactional Support Services: PwC


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