Buyers circling Libstar have smelt value. The food producer issued a cautionary note this week telling investors that it had received non-binding buyout offers, sending its share price surging more than 16%. It did not disclose the details of the buyout offers.
The high drama for the company that turns out condiments and canned foods was, in all likelihood, provoked by a battered share price, a balance sheet that still generates meaningful cash and that looks repairable. That combination invites two competing narratives. The first one is a classic private equity swoop on mispriced assets, and the other is that the price discount simply reflects genuine operation and macro risks. Both have merit. The question for investors and the market is which one will win out
The opportunism case rests on arithmetic and psychology. Trailing earnings before interest, tax, depreciation and amortisation (ebitda), or core profit, of about R974m makes Libstar look less like an industrial corpse. Apply a mid-market multiple — say 10 times ebitda — and enterprise value climbs to nearly R10bn; subtract the reported net debt of R1.8bn as of the 2024 fiscal year, and equity value approaches R8bn.
That sum sits a comfortable distance above the company’s market capitalisation of R2.6bn that the market has been willing to ascribe. Buy the business at a liquidation-discount price, cut costs, sell no-core brands and either relist or flip the assets. That is a familiar, profitable script for financial sponsors.
There are also behavioural clues. The approach is non-binding and surfaced amid a market that seems eager to write off the firm, the textbook conditions in which private buyers prowling for bargains appear. When management has already put meat on the recovery story, a buyer confident in operational fixes needs only to supply capital and governance discipline to accelerate recovery.
For starters, a shared service backbone for wet condiments is live; Rialto, Ambassador Foods and Cape Coastal Honey integration are running to plan; Dickon Hall will be folded into Montagu by mid-2026; and where divestments faltered, the group has moved to controlled closures and property sales.
Phesantekraal will close and Cape Town and KwaZulu-Natal sites monetised while profitable Deodar stays. Management has committed to exiting Contactim and the company's 60% stake in Umatie.
These are not comforting talking points for bargain hunters. They are concrete actions that narrow the informational advantage for opportunistic bidders and raise the bar for any lowball pitch.
That said, there’s a genuine counterargument to the opportunism thesis worth airing in the boardroom. Impairments of more than R500m in 2024 often signal deep problems, obsolete lines, failed product bets or brand erosion that can take years to repair. A buyer paying on a trailing ebitda basis risks financing itself on yesterday’s results while today’s operating environment makes tomorrow’s cash flows less predictable.
Still, Libstar’s half-year earnings report, issued this week, shifts the balance. It posted R90m in net profit, suggesting a nearly R200m profit rebound for the full year if it maintains the same growth rate. That is a swing from a more than R300m loss suffered in 2024, suggesting that Libstar is running a business with demonstrable self-help progress. That raises the price that opportunistic bidders must pay to capture value, and compels them to show their hands.
Either a bidder pays a credible premium for a streamlined, self-help story, or shows their bid is anchored in scale rather than with an exit clock.
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