RFG’s share price has surged more than 50% in the past 90 days as investors show growing confidence in Premier Group’s planned takeover — a deal that would create one of South Africa’s biggest food producers and reshape the local consumer goods sector.
The rally began after Premier announced in October that it would acquire RFG in a share-swap transaction, offering a premium of more than 35% to RFG shareholders. The gains in the share price indicate the market trusts the deal will clear final regulatory hurdles.
Premier’s shares have also benefited. Since the announcement, its share price is up more than 14%, extending its one-year gain to 37%.
RFG’s recent surge builds on a long-term performance. Over the past three years, its shares are up 87%, and over five years, they have gained 92%. Since listing on the JSE in 2014, RFG has grown revenue at a compound annual rate of 11.6%, headline earnings per share (HEPS) by 13.9% and dividends per share by 14.9%, according to its latest annual report.
In her final letter to shareholders, outgoing chair Yvonne Muthien described this performance as “outstanding”, especially given the headwinds RFG has faced from the Covid-19 pandemic, civil unrest, climate shocks, weak economic growth and the country’s prolonged energy crisis.
RFG is a major player in everyday food products, with well-known brands such as Rhodes, Bull Brand, Hinds, Squish, Today and Mama’s Pies.
Group revenue for the year to end-September increased to R8.1bn, boosted mainly by its regional business at home and Sub-Saharan Africa, which grew 4.1% and now accounts for more than 80% of total revenue.
However, profit came under pressure with headline earnings falling nearly 10%, while international operations were hit hard by weak global demand for deciduous fruit products and growing trade barriers.
Exports to the US, which comprise nearly a third of RFG’s international revenue, were dealt a big blow by the new 30% tariff and the expiry of duty-free access under the African Growth and Opportunity Act.
CEO Pieter Hanekom warned shareholders in his letter that these developments pose a material risk to revenue and profitability. In response, RFG has cut production volumes, sought alternative export markets and doubled down on growing its regional business to reduce reliance on volatile international sales.
This strategic move is central to the Premier deal.
Premier and RFG shareholders voted “overwhelmingly” in favour of the transaction in December, Hanekom said. The deal is expected to be completed in March.
Once completed, RFG will delist from the JSE, with its shareholders collectively owning about 22.5% of the enlarged Premier. The combined business is expected to generate nearly R28bn in annual revenue and about R1.7bn in profit after tax.
‘Compelling opportunity’
Muthien said the transaction offers a “compelling opportunity” for shareholders to participate in the growth of a stronger, more diversified food group. She described the deal as bittersweet, given RFG’s long history as a listed company, but said it positions the business for long-term success.
Premier brings scale, financial strength and a strong presence in staple foods such as bread, maize and flour through brands such as Blue Ribbon, Snowflake and Iwisa. RFG complements this with its focus on convenience meals, long-life foods and value-added products. There is little overlap between the two companies’ product ranges.
Premier CFO Fritz Grobbelaar has said the group is not done expanding. Premier has “room and appetite” for further acquisitions, backed by a strong balance sheet and sharply reduced debt, he said recently.
Over the past year, Premier cut its gearing to 0.7 times from 1.9 times and announced a share buyback, a signal of confidence.
The integration of RFG is expected to take one to two years, with a focus on eliminating duplication in buying, logistics and distribution. Grobbelaar has said the real value lies in “backend synergies” and running the combined business more efficiently.
For RFG, the deal offers stability amid uncertainty. The group has confirmed there will be no retrenchments, and the senior leadership team will remain in place to continue running operations within Premier. This continuity is seen as key to protecting RFG’s manufacturing base and relationships with big retailers.
Both companies are also betting on an improving South African outlook.
Muthien pointed to lower inflation, interest rate cuts, South Africa’s removal from the Financial Action Task Force greylist and its first sovereign credit rating upgrade in two decades as reasons for renewed investor confidence.
For now, the market appears convinced, but the final test will come when competition authorities give their verdict.
Until then, RFG’s share price shows this is a deal the market wants to see done.
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