Israeli consortium bids for South African food & beverage behemoth

By David E. Kaplan

Contrary to those half-witted South African politicians who advocate keeping their distance from Israel, are the astute in the country’s business community who think the positive opposite. The operative word is “THINK” as this week reveals a proposed marriage of South Africa’s beverage giant Clover with Israel’s Coca Cola.

Of course, a deal is only a deal when all is signed – but why keep this news ‘bottled’ up – when the champions for enterprise and entrepreneurship in both South Africa and Israel are so enthused to see ‘golden’ opportunities above ground rather than the usual mineral subterranean variety.

 

Heading a consortium called MilCo, Israel’s Central Bottling Company (Coca Cola Israel) submitted a bid to acquire control of Clover, in a deal that values the South African public traded company at $359 million (NIS 1.3 billion). The consortium is offering the SA food producer’s shareholders R25 per share, which will amount to 59.5% of the SA food producer.

Interestingly, while Clover traces its history back to 1898 with farmers meeting in the lush pastures of the Natal Midlands to discuss the establishment of a butter factory, only a year earlier in 1887, 208 delegates met at a hotel in Basel Switzerland where the modern Zionist movement was birthed under the chairmanship of Theodor Herzl.

Trajectories of both affirm that with determination, passion, grit and self-belief, the impossible becomes possible.

While Clover Industries produces milk and juices, has 8,000 employees and owns 13 production facilities throughout South Africa, the Central Bottling Company is the fourth largest manufacturer of consumer products in Israel. It owns a number of leading brands, headed by Coca Cola Israel, Tara Dairy, and other beer and soft drink brands.

Eran Elsner, who manages the Central Bottling Company’s overseas business, said, “The Central Bottling Company group believes that its activity is synergetic with the activity of the company in South Africa. There is a reciprocal contribution of knowledge and experience between the Central Bottling Company group and the overseas companies, which is channeled towards innovation and business development, while providing added value to consumers, who are always foremost in our considerations.”

Other members of the MilCo consortium are Ploughshare Investments, which will buy 10.9%, and IncuBev, which will buy 8.3%. The latter is an international business focused on the food and beverage sectors in sub-Saharan Africa.

A barometer of the excitement following the announcement, Clover’s share price jumped 19% to R23.80 on Monday morning after the JSE opened.

At the same time in Israel, CBC, whose subsidiary companies serve more than 160-million consumers worldwide, made the following press release:

“CBC is Israel’s leading manufacturer and distributor of beverages and, through its foreign subsidiaries, has manufacturing and distribution operations in Turkey, Romania, and Uzbekistan. CBC, which is also the owner of the Tara dairy, Israel’s second-largest milk processing dairy, produces and distributes its own brands and Müller brands, and it operates the license for the Müller brand in Romania.”

CBC also owns Gat Foods, a “grove to table” juice operation with customers in more than 70 countries. In addition, CBC works closely with its international franchisors, including The Coca-Cola Company, Carlsberg, Anheuser-Busch InBev, the Müller Group and Diageo.

Further South African participation in the bid is Brimstone Investment Corporation (Brimstone) cementing its plans to further expand into the food sector.

“In addition to a long history of being one of South Africa’s most popular brands,” says Brimstone CEO Mustaq Brey, “Clover runs South Africa’s largest chilled and frozen goods distribution network and is well placed for further expansion. This made it an attractive investment proposition for the foreign direct investment which South Africa desperately needs if we wish to achieve the economic freedom our country deserves.”

Brey added that all of Brimstone’s investments are geared towards transforming the South Africa’s economy by creating shareholder value on a sustainable and responsible basis. “In this transaction, MilCo is adopting an owner-operator approach and a long-term investment horizon with a view to grow the dairy category as a whole, thereby benefiting local farmers and other suppliers throughout the value chain.”

Building for the Future

Clover has a “strong portfolio of brands and best distribution system in South Africa,” said Richard Izsak, CBC’s chief of staff and Israel Country Manager and Strategic Planning Director for The Coca-Cola Company’s Eurasia Group. “We want to build the company for the long term.”

While foreign takeovers of South African listed-companies have been a rarity in recent years, State President Cyril Ramaphosa has made clear that international investment is a centerpiece of his plans to revive the economy. The challenges are immense – weak economic growth and high unemployment and as warned by the US and the UK, “ongoing corruption scandals are a barrier to investment” as recently reported in South Africa’s Sunday Times.

This is not deterring Israel that has faith in South Africa.

Regarding the economy, says Izak, “CBC is investing for long term, even if there are some ups and downs in the short term.”

It’s the more the “downs” than “ups” that are keeping away much foreign investment, however Israel is ready and willing to invest.

Despite political currents and the diplomatic obstacles, the “Startup Nation” continues to enjoy a prosperous relationship with South Africa.

“South Africa is a country of unquestionable business potential,” said the head of the Israeli Economic Mission to Southern Africa Amit Lev in 2018 to the SA Jewish Report. “While it can be difficult at times, the trade relations between South Africa and Israel are mutually beneficial and have potential to improve both countries significantly.”

Noting that Israel’s trade with South Africa is low relative to business engagements with other countries – accounting for only 1% of overall trade – Lev expressed that “with the right approach and resources, there is an opportunity to make a difference in the markets of both Israel and South Africa.”

Lev discounts the impact of BDS as a challenge for business. While these threats must be addressed, “our success stories outnumber such problems.”

There are many advantages to carrying out business in South Africa. “Besides being a portal to the rest of Africa,” said Lev, “the country has a growing economy, a sophisticated banking system which is compatible with Israel’s, and it is a member of the BRICS (Brazil, Russia, India, China and South Africa) group.

“Also, the country is a top agriculture producer, and the issues it is currently facing regarding water are ideal for the implementation of business infrastructure and solutions from Israel. Israel has so much to share with South Africa in the water, hi-tech and agriculture sectors, and the opportunity for Israel here is immense.”

Reflecting on the economic achievements Israel has notched up in the past 70 years, “Now is the time for Israel to mature its economic sector and move into its next 70 years of success. By creating multinational corporations, growing its trade network around the globe, exposing itself to more opportunities and inviting others to be a part of the growth, Israel can be enhanced and make giant steps in this magical movement of economy.”

While the business relationship between South Africa and Israel is promising, the Coca Cola bid for Clover indicates that the future could be even more promising.

ANC politicians – take note!