More than two months after announcing a decision to reconsider its participation in the consortium eyeing Clover, investment firm Brimstone on Friday confirmed its exit from the R4.8bn deal.
Brimstone’s exit ends suspense about the fate of the deal, which will see a grouping of companies — led by Israeli firm Central Bottling Company (CBC) — acquire Clover’s shares for R25 each.
The move has opened the door for an unnamed black economic empowerment (BEE) company to acquire Brimstone’s 15% interest in the consortium.
Brimstone said on Friday it was in “advanced” negotiations with a potential BEE shareholder which could take up its R726m stake in the deal by December 31 2019.
Days after the announcement of the transaction in February, the black-owned and managed company said it would review its participation in the deal, bowing to pressure from Palestine solidarity organisation BDS SA and trade union Food and Allied Workers’ Union (Fawu). The two organisations slammed the participation of CBC in the consortium, also known as MilCo. BDS threatened to disrupt Clover’s operations if the deal went ahead.
Brimstone said it had sealed an agreement with MilCo and International Beer Breweries Limited (IBBL), a subsidiary of CBC “to facilitate Brimstone’s exit from its participation in the Clover transaction”. This ends speculation about Brimstone’s intentions regarding the transaction.
In terms of the agreement, IBBL had agreed to acquire Brimstone’s interest in Milco on December 31 “if by that date Brimstone has not been able to secure a suitable replacement broad-based black economic empowerment investor”.
MilCo on Friday reiterated its commitment to finalise the transaction, which will culminate in Clover’s delisting in mid-May. “In addition, the consortium remains fully committed to having a significant BEE partner as part of the transaction,” MilCo said in a statement.
The consortium, whose other members include food and beverages group IncuBev, investment firm Ploughshare Investments and Clover executive management, said the transaction was proceeding. “The deal is intact and moving ahead.”
Brimstone declined to make further comments.
Fawu general secretary Katishi Masemola applauded Brimstone for walking away from the deal. The move, however, did not take away all of Fawu’s misgivings about the transaction.
“We are opposed to the deal on various grounds. The first one relates to the participation of the Israeli company. Our country and companies should not do business with Israeli companies,” Masemola said.
The union also opposed the deal because it would result in the sale of the country’s only major dairy companies. “Danone is French, Nestle is Swiss and Parmalat is Italian. Only Clover is in local hands,” he said.
Masemola said Fawu was concerned about potential job losses as a result of the transaction, saying the new owners could depart from Clover’s strategy to pursue higher volumes. “Clover is one of few major companies that still has merchandisers internally,” he said.
The union has questioned the exclusion of employees in the ownership structure of MilCo. “We have made a submission to the Competition Commission about public interest conditions that must be attached to the transaction,” Masemola said.
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