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RCL Foods to Buy Remgro’s TSB Sugar Holding in $394 Million Deal

Nov. 21 (Bloomberg) -- RCL Foods, South Africa’s largest chicken producer, plans to buy two TSB Sugar Holdings Pty Ltd. units for 4 billion rand ($394 million) in shares to diversify.

RCL, formerly called Rainbow Chicken, will issue close to 231 million shares at 17.32 rand each to buy the South African and Swaziland-based operating units of TSB, owned by Remgro Ltd., the Durban-based company said in a statement today.

Remgro, a holding group controlled by billionaire Johann Rupert, also owns a majority of RCL, which in April raised its stake in New Foodcorp Holdings Pty Ltd. to 88 percent.

The TSB deal “provides a unique opportunity for RCL Foods to diversify across the food industry value chain,” RCL’s Chief Executive Officer Miles Dally said in the statement. It also allows Remgro “the ability to restructure its various food interests under a single platform.”

South Africa’s chicken producers are seeking to diversify away from selling the meat amid claims that cheap imports of poultry cuts from Brazil and Europe are undermining the local industry. Lower sugar prices, caused by excess investment when prices were higher two years ago, have also hurt earnings.

TSB’s three sugar mills in the eastern Lowveld of South Africa close to Mozambique have the capacity to produce 700,000 metric tons of sugar a year, according to the statement. The Swaziland-based assets produce about 420,000 tons, it said.

RCL will raise 2.5 billion rand with a rights offer if the TSB deal is concluded including a pro-rata issue to minorities, Stephen Heath, director for corporate affairs, said by phone.

The company is also proposing a new transaction for black shareholding in the company at 7.7 percent prior to any further fundraising, Heath said. Matthews Phosa, a former treasurer of the ruling African National Congress, stands to gain 120 million rand through a family trust on conclusion of the black ownership deal. Phosa declined to comment when contacted by phone.

To contact the reporter on this story: Andre Janse van Vuuren in Johannesburg at ajansevanvuu@bloomberg.net

To contact the editor responsible for this story: John Viljoen at jviljoen@bloomberg.net

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