Brian Joffe’s acquisitive investment group Long4Life has a cash pile of R1.1bn, which it intends using for takeover opportunities.
Since listing on the JSE in April 2017, Long4Life has grown quickly through several acquisitions, including its takeover of packaging group Inhle Beverages, sports retailer Sportsmans Warehouse and beauty spar chain Sorbet.
Joffe said though more acquisitions could be on the cards, finding suitable takeover targets had not been easy as one of the biggest obstacles to making further acquisitions was the mismatch between the valuations Long4Life made for targeted companies and those of the prospective sellers.
“Sellers’ expectations and asset valuations have not reflected the difficult economic climate and in many instances have not met the group’s valuation criteria.”
Valuation mismatch
Aside from the valuation mismatch, Joffe said another issue was finding a business of a certain size, which could be scaled up quickly. The group did not want to be in the position where it was trying to integrate about 20 small businesses, which it could not expand quickly enough.
“The focus is on businesses that can provide satisfactory growth and returns to shareholders and where Long4Life’s capital and strategic capability can be successfully leveraged,” the group said.
Strategic acquisitions were one of the reasons it performed well in the year-to-end in February. Joffe said adding a company such as LimeLight, a distributor of beauty products and equipment, for instance, meant Long4Life was now the primary supplier to its Sorbet outlets. Taking over LimeLight in 2018 was one of the reasons its personal care and wellness division increased from R32.8m to R73.8m for the period.
Long4Life reported that total revenue rose to R3.64bn from R884.7m and trading profit increased to R454.1m from R147.4m. The 2019 results however were not comparable as it only took effective control of Sorbet, Inhle Beverages and Holdsports, Sportsmans Warehouse’s controlling company, on November 1 2017.
It has since gone on to buy drinks group Chill Beverages in a R493m deal, on March 1 2018. It also took a 61% interest in health business ClaytonCare for R39.9m on September 1 2018.
The combined revenues and trading profit of LimeLight, Chill Beverages and ClaytonCare were a respective R1.27bn and R106.3m for the period under review.
Even though the group did reasonably well, Joffe was not completely happy as he thought it could have managed its assets better and pushed more deals through.
The market, however, liked what it saw, as the group’s share price closed up 3.61% to R4.88 on Wednesday, its largest rise in three weeks.
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