Consumer goods group Libstar says it will exit a deal to sell its stake in its household and personal care segment, citing volatility and an improvement in the businesses.
In February, the maker of Lancewood dairy products, Denny mushrooms and Goldcrest canned goods said it had received an offer from PAPE Fund Managers and Kanaka Chemicals for a 70% equity interest in two of its household and personal care (HPC) businesses for a reported R217m.
At that time, CEO Andries van Rensburg said exiting the segment was in line with the company’s bid to reposition its portfolio towards its other four value-added and higher-margin food categories, and would allow the group “to focus exclusively on the growth of our core business”, a move analysts welcomed.
Libstar’s consolidated HPC division combines three established units — Chet Chemicals, Contactim and Glenmor Soap that manufacture tissues and cotton wool, bleach, dishwashing and all-purpose cleaners, bath and shower products, and soap. The business supplies every major retailer in SA, collaborating with each to manufacture their private labels.
Libstar’s other businesses include perishables, which contributed 52% of group revenue for the year to December 2021, while groceries made up 33%, with snacks and treats, and baking and baking aids accounting for the rest.
In a sudden turnaround, the company said on Wednesday the purchasers had agreed to “terminate discussions” relating to the proposed transaction as the deal had not been concluded.
The group told Business Day that “Libstar’s strategy remains focused on growing and allocating capital to four value-added food categories, which contribute over 93% of group revenue. As such, the termination of discussions in relation to the HPC business does not affect the overall growth and consolidation strategy”. It would not be drawn on whether it was considering other buyers for the business, but the board said it would continue to evaluate strategic options in relation to the HPC category.
Analyst at Investec Corporate & Institutional Banking Anthony Geard, said it “sounds like a disaster if they are reversing course on exiting HPC. They probably couldn’t find a buyer.”
Libstar said despite the challenges affecting the HPC category and broader trading environment, “the business has delivered an improved result relative to the previous financial year, aided by a review of the current product portfolio, and accelerated new product development and a bolstered management team”.
This was against headwinds of unprecedented supply-chain disruptions, input cost inflation and economic pressure, although historic group results illustrate that the food categories have consistently outperformed non-food categories.
Strategic
Keeping its portfolio diversified beyond food may be strategic as food producers across the globe battle the inflationary pressures brought on by Russia’s invasion of Ukraine which has sent prices for essential commodities soaring.
At the company’s AGM on Wednesday, 18.35% of shareholders voted against the remuneration policy with a larger portion — 25.18% — of shareholders voting against the endorsement of a remuneration implementation report.
The Cape Town-based company said it would initiate a process to engage with the dissenting shareholders. Major investors include Apef Pacific Mauritius, the Government Employees Pension Fund and Business Venture Investments.
Libstar’s share price was little changed at R5.40, having risen 2.48% over the past seven days of trade.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.