July 8 (Bloomberg) -- Bidvest Group Ltd., a South African holding company with businesses from catering to cosmetics, will probably list its Foodservice unit in a major offshore exchange, analysts at Deutsche Securities wrote.
The unit is the subject of unspecified interest from unidentified third parties, Bidvest said on July 6. While Bidvest believes that Foodservice is an “attractive business with strong growth prospects,” it said it will explore whether any of the unsolicited proposals would optimize value for shareholders and undertake a strategic review of the division.
“Partial listing is in our view the highest probability scenario,” Deutsche Bank AG’s Johannesburg-based unit said. A listing on an exchange like Hong Kong has several advantages, analyst Roy Mutooni said in a note yesterday. Mutooni has a “buy” recommendation on Johannesburg-based Bidvest.
A listing abroad “gives the group the opportunity to incentivize operational management within the Foodservice business with equity in their own business,” Deutsche Securities said. “It provides capital for further acquisitions and provides a fair market value for this business.”
Deutsche Securities, which values the division at between 18 billion rand ($2.7 billion) and 20 billion rand, said Bidvest may also sell its biggest revenue and earnings generator for cash to the unnamed suitors. “We see this as the least likely option, considering Group Chief Executive Officer Brian Joffe’s often mentioned stance against any potential transaction reducing the scale of the business.”
A third option is a partial sale to a bigger international entity while retaining a reduced stake. “While conceptually elegant, this flies against Bidvest’s philosophy of controlling the cash flows of all its key businesses,” Mutooni wrote.
Foodservice may fetch $4 billion, a person familiar with the transaction said July 6. Bidders may include Sysco Corp., the biggest North American distributor of food to restaurants; U.S. Food Services, owned by KKR & Co. and Clayton Dubilier & Rice Inc.; and Brakes Group, owned by Bain Capital LLC, said the person, declining to be identified as the matter is private. It’s unclear whether these companies have made approaches.
Bidvest spokeswoman Carol Dundas declined to comment when contacted by telephone, saying the company has said all it can at this stage.
“Bidvest would not be considering any deal, and would not have made any announcement, unless it believed such a deal will add substantial value for its shareholders,” said Wayne McCurrie, a portfolio manager at Johannesburg-based RMB Asset Management, by phone. He added that his firm “is not selling any” of its shares in the company.
RMB holds about 2.1 million Bidvest shares, equating to 0.7 percent of the company, according to data compiled by Bloomberg. “It is one of our major holdings,” said McCurrie.
--Editors: Jerrold Colten, Vernon Wessels
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