Building Further Manufacturing Capability
Famous Brands has acquired a controlling 75% stake in Cater Chain Food Services (“Cater Chain”), a local business distributing primarily red meat products to customers across South African and into certain markets in Africa.
The purchase consideration falls below the threshold of a categorised transaction in terms of the Listings Requirements of the JSE Limited and will be settled from cash reserves. The transaction is subject to Competition Commission approval, and pending fulfilment of this condition, the effective date will be the first day of the month following that month whereupon all of the conditions precedent have been fulfilled. Cater Chain’s senior management team will be retained, thereby facilitating a seamless integration of the business into Famous Brands’ operations.
Established by siblings Roy and John Tem-Tem in 2004, Cater Chain today trades from a modern 15 900m² production facility comprising latest-technology processing equipment and significant freezer and chiller capacity. The plant, which is situated in City Deep in Johannesburg, consists of separate Halaal and non-Halaal facilities. Production capacity is in the order of 900 tons per month, and products supplied to the food services market include beef, lamb, mutton, chicken, bacon and ham.
Group CE, Kevin Hedderwick says, “This acquisition further underpins our strategy to establish Famous Brands as a total food service solutions company. Our vertically integrated business model, comprising our branded food service franchising division supported by our manufacturing and logistics divisions is a key strategic advantage, and our steadfast mission over recent years has been to build capability across all three pillars of the business.”
Hedderwick comments, “This acquisition appealed to us for a number of reasons. The major upside will be the opportunity to integrate currently outsourced business into the facility at a relatively low cost of entry and derive an immediate income stream compared to the alternative of constructing a purpose-built facility, which would entail higher set-up costs and a three to four year lead-time before synergies could be leveraged through the business. In addition, the facility will provide additional storage capacity in terms of our bulk beef requirements.” “Furthermore,” he notes, “operating on a five-day week, single-shift system, the capacity to take on additional business is significant.”
Roy and John Tem-Tem comment, “We are extremely excited about this transaction. We have always been ambitious for our business, and being offered the opportunity to partner with Famous Brands, the recognised leader in the branded food services sector, will enable us to realise our goals and unlock Cater Chain’s full potential. Having been in the industry for over 30 years we understand that change is required for a business to grow and we look forward to embracing these changes and the benefits that will accrue to Cater Chain as a result. Through this new venture, Cater Chain will profit from Famous Brands’ proven business model and the quality and scale of its customer base; in turn we will contribute a committed and experienced management team and an accredited modern facility with extensive production capacity. We have always strived to manufacture the best quality product for our customers and are confident that this philosophy will be an asset in the future.”
Hedderwick concludes, “To take on a sophisticated manufacturing operation such as this requires courage, and the fact that we are able to do so with confidence is indicative of the significantly improved skills base in our manufacturing division, a function of intensive focus on building capability in this part of our business over the past few years.”