South African listed food group AVI is set to spin off and list Consol, its glass packaging company, on the Johannesburg Stock Exchange (JSE) Securities Exchange by March 2005 as part of its long-stat…
South African listed food group AVI is set to spin off and list Consol, its glass packaging company, on the Johannesburg Stock Exchange (JSE) Securities Exchange by March 2005 as part of its long-stated objective of becoming a focused branded consumer and services group. AVI said 12 October 2004 that it had already acquired the minority stake of 19.3% in Consol formerly held by Owens-Illinois, the world“s largest manufacturer of glass containers, for ZAR 525 million. Based on the Owens-Illinois deal, effective 11 October 2004, Consol is valued at about ZAR 2.7 billion. However, Angus Band, the group managing director of AVI, was cautious about using the purchase price of the stake as a basis for the valuation of the whole Consol group, as a minority stake had a discount attached to it. Band said the deal was done at a historic price:earnings (P:E) ratio of 8.2. Pierre Marais, a portfolio manager at African Harvest Fund Managers, said it was difficult to put an exact value on Consol. However, based on a conservative estimate of ZAR 300 million in Consol“s after-tax operating profit and a price:earnings ratio of around 12, which is a discount to the market, the group would be valued at about ZAR 3.6 billion. Marais said Consol“s operating efficiency had improved immensely since delisting in 1998, mainly thanks to good management. Operating margins had risen from 13.7% in 2000 to 22.8% in 2004. “AVI has chosen an ideal time to list Consol, as the operating margins may have reached their peak due to the capital expenditure cycle.” AVI said the Owens-Illinois acquisition would be funded from its cash resources and the proceeds from the sale of Vector Logistics to Rainbow Chicken. Band said the restructuring of AVI was empowering for the whole group and Consol had the market credibility and financial strength to pursue a long-term growth strategy independent of any parent company. “It also leaves AVI as a more streamlined business, fully focused on branded consumer products and services and with a leading portfolio of brands that will support ongoing growth through innovation and acquisition,” said Band. Following the 1999 reorganisation of the old Anglovaal Industries group, Consol and Vector were restructured and had become profitable market leaders in their respective fields. Consol was delisted in 1998 as it was not trading well and needed restructuring, which AVI felt at the time would be best achieved as an unlisted entity within the bigger group.