RCL Foods announced on Tuesday that it had concluded an agreement for the acquisition of Sunshine Bakery from Afgri Group Holdings, in a move set to increase bread volumes in the RCL Foods baking network by 28%.
The Sunbake brand has been supplying baked goods to the food-producing giant with market capitalisation of more than R9.8bn on the JSE for more than a decade.
But now the owner of the Nola, Rainbow Chicken and Selati sugar brands says the buyout of the additional Sunshine bakery company is in line with its strategy to scale the value-added brands component of its portfolio, and expand the capability of its established baking business unit into new regions.
This was despite baking margins being challenged by high input costs, according to the company’s 2022 interim results where RCL reported that demand remained relatively strong, notwithstanding the implementation of selective price increases to offset growing commodity cost pressures.
The war in Ukraine has further compounded the situation by impeding imports of essential grains, including wheat. However the newly signed “grain deal” promises to ease pressure in the coming months.
The 17-year-old KwaZulu-Natal-based Sunshine bakery, which is indirectly majority-owned by Afgri Group Holdings, is one of SA’s largest independent baking businesses.
It serves a diversified customer base in the formal retail and general trade channels, through two regional bakeries in Durban and Pietermaritzburg, as well as various depots across the province.
RCL said on Tuesday the transaction was subject to the fulfilment of both regulatory and commercial suspensive conditions by no later than November 30.
RCL Foods flagged that its capital expansion project at the Polokwane bakery is on track for commissioning before fiscal year-end.
In 2021, RCL resolved to bulk up its fast-moving consumer goods business through acquisitions while separating its chicken unit, sugar unit and Vector Logistics into separate legal entities.
By 3pm on Tuesday RCL’s share price was up 1.16% to R10.47.
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