Nov. 17 (Bloomberg) -- Tiger Brands Ltd., South Africa's largest food company, offered 8 billion rand ($790 million) for AVI Ltd. to add brands such as Frisco coffee and Baker biscuits.

The cash-and-stock bid is worth about 24 rand per AVI share, 62 percent more than AVI's closing price of 14.80 rand on Nov. 14, Tiger said today in a statement, adding that the offer is yet to be made formally. AVI, which rejected the proposal, gained 32 percent in Johannesburg trading.

``It's a very clever deal,'' said Julian Wentzel, an analyst with Macquarie First South Securities. ``Tiger have gone for a knock out price. They want shareholder acceptance.''

A transaction could produce savings of between 150 million rand and 300 million rand, according to Wentzel. Tiger plans to spend about $394 million over five years boosting manufacturing capacity as well as buying into categories and countries that it is not represented in. The company's strategy is to dominate its local market and expand into east Africa and west Africa.

AVI said the offer is the third made by Tiger since Oct. 8. The board ``is of the view that the potential offers were not in the best interests of AVI or its shareholders,'' the company said in a stock exchange statement. AVI is ``unconvinced as to the commercial merits as set out by Tiger Brands.''

AVI gained 4.70 rand to 19.50 rand in Johannesburg, valuing the company at about 6.7 billion rand. Tiger rose 2.50 rand, or 1.8 percent, to 139.50 rand.

Canvassing Shareholders

``The pricing seems incredibly attractive for AVI shareholders,'' Rudi van der Merwe, an analyst with Standard Financial Markets Equity Advisory Services, said in a telephone interview from Johannesburg today. ``As a Tiger shareholder, I would be concerned that it was very expensive.''

Tiger is now canvassing AVI's shareholders for approval, Chief Executive Officer Peter Matlare said on a conference call.

AVI is South Africa's second-largest food company. Tiger is ``taking advice'' on antitrust concerns, Matlare said, adding that there isn't much overlap apart from fisheries. Tiger said on Oct. 31 that it was disposing of its 73.16 percent stake in Sea Harvest to investors headed by Brimstone Investment Corp.

Johannesburg-based Tiger is offering 14.40 rand in cash for each AVI share in addition to 6.989 of its own shares for every 100 AVI shares. Tiger already holds 4.6 percent of AVI's shares.

Putting the companies together would result in a ``more efficient and effective platform from which to position the combined entity for accelerated growth,'' Tiger said. The merger would be ``used to drive the African expansion effort.''

Biscuits and beverages would offer immediate opportunities for Tiger following a transaction, the company said.

Funding for the deal is being put in place, Matlare said.

To contact the reporters on this story: Antony Sguazzin in Johannesburg at asguazzin@bloomberg.net; Nicky Smith in Johannesburg nsmith38@bloomberg.net.

Last Updated: November 17, 2008 10:20 EST