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Clover-Bowler deal ‘would make sense’
Clover-Bowler deal ‘would make sense’

Clover-Bowler deal ‘would make sense’

RETAILER NEWS - Jul 23rd 2014, 15:50

A takeover of Bowler Metcalf’s beverages business, by Clover Industries, would "make strategic sense" for the companies, analysts say. 

Both companies have issued cautionary announcements of negotiations — though neither has revealed with whom.

Bowler’s Quality Beverages business produces the Jive and Vimto ranges of soft drinks. Together with its plastics division, the group’s market capitalisation is about R690m.

Clover, which has a range of beverages, none of which are carbonated soft drinks, is valued at just more than R3bn.

It is buying DairyBelle’s yoghurt and ultra-high-temperature milk manufacturing, and marketing and distribution businesses for R125m and R30m respectively.

The company has been looking to move into more innovative and high-margin product lines such as yoghurt and custard, though it could do so only after it ended its supply and service agreement with Danone. It did that recently.

In March, Clover announced a 50-50 joint venture with specialist food company Futurelife to launch new product ranges.

Vunani Securities analyst Anthony Clark has speculated that Clover’s latest cautionary could relate to a possible buyout of Quality Beverages.

It could also indicate joint ventures with Nestlé, or even a takeover of Clover by Nestlé, he said on Monday.

Clover "could easily afford" a buyout of Quality Beverages, and it would be a relatively easy transaction to implement, he said.

While Quality Beverages was weighed down by the underperformance of its Gauteng operations, "in the Western Cape, Jive is a great brand" that was in demand from retailers.

However, Quality Beverages’ state-of-the art logistics and distribution plant in Johannesburg "is running significantly below capacity and needs major investment", Mr Clark said.

The deal could "make strategic sense" for Clover and Bowler. Clover would gain access to carbonated soft drinks and could expand the Jive range. Bowler could use the proceeds "to become, once again, the best speciality packaging company" in South Africa. He said Clover could make a success of Quality Beverages’ Gauteng expansion. This also could be done under Bowler’s ownership, but it would take longer "and the losses will continue to be a thorn in their side".From DFM Publishers (Pty) Ltd 

Read more about: nestle | gauteng | clover | bowler metcalf

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