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Coasting along

Bulking up- [http://www.financialsumo.com/wp-content/uploads/2015/04/Investing-Chart.jpg] Bulking up- [http://www.financialsumo.com/wp-content/uploads/2015/04/Investing-Chart.jpg]

Steenberg-based investment company Coast 2 Coast (C2C) has moved into the big league with its two mainstay investments starting to bulk up at a rapid rate.

C2C is the anchor investor in health brands conglomerate Ascendis – which is listed on the JSE – and consumer brands conglomerate Bounty Brands – which is aiming for a listing on the JSE and London Stock Exchange next year. Both Ascendis and Bounty Brands have followed a growth-by-acquisition strategy – starting with small local deals and then racking up bigger deals once the respective balance sheets and cash flows were firmly established.

Ascendis – which was founded in 2008 – has a heath brands portfolio that covers market- leading brands for animals, plants and humans. The company has a growing export and global bias.

Bounty Brands, established in 2014, invests largely in premium brands in chosen local and international markets. Since its formation it has snagged a slew of acquisitions – including Chappers Sports Direct, Table Charm, Cosmetix, Annique Health and Beauty, Musgrave Agencies, Liberty Foods and its first international business, Sonko.

Last month Ascendis and Bounty took giant steps in their respective goals to build formidable brands clusters. Ascendis paid a collective R5,8bn to acquire two major European health businesses, Remedica Holdings and Scitec International. Remedica is a generic pharmaceutical manufacturer based in Cyprus, while Scitec is a leading European sports nutrition company.

Ascendis Health CEO Karsten Wellner said the company’s strategy was to complement growth in the domestic health and care market through international expansion and by acquiring platform businesses offshore. The deals mean that around half of Ascendis’ sales will be generated by foreign operations and products sold in 144 countries globally. Last year Ascendis completed its first offshore acquisition when it bought an initial 49% stake in Spanish pharmaceutical company Farmalider. Wellner said the two acquisitions were expected to have a material financial impact and increase Ascendis’ earnings by more than 50%.

Last month Bounty showed it would not be left behind in deal-making endeavours by its corporate cousin, announcing no less than four acquisitions worth collectively over R1bn. CEO Stefan Rabe said the deals were part of a growth strategy to push Bounty’s revenue beyond R5bn and operating profit through the R1bn mark before listing on the London Stock Exchange and JSE next year. In short, Bounty has acquired Rieses Food Imports (RFI,)Tuffy, Goldenmarc and Footwear Trading.

RFI bolsters the revenue of Bounty’s Foods category to more than R1,2bn offering access to a portfolio of brands like Serena, Offenau, Jemz and Sea Queen as well as international brands like Sonko, Pietro Coricelli, Real Foods and Fantico.

Bounty’s established a Home Care category with acquisition of plastics bag maker Tuffy and cleaning products specialist Goldenmarc, which together will contribute revenue of R870m to the group. Rabe reckoned Tuffy was a fantastic business.

“Its brand has become synonymous with durable refuse bags that are made from 100% recycled materials – something no local competitor and few international ones can claim.”

Footwear Trading, the fourth acquisition, brings with it the licenses for two iconic fashion brands in Diesel and Levis – adding to Bounty’s existing range that spans Vans, Hurley and Jeep. The addition of Footwear Trading will bring the total revenue contribution from the apparel and footwear brands to over R1bn. Rabe stressed that the consolidation of leading apparel and footwear agency brands has been a successful strategy for Bounty in South Africa.

“It creates a sizeable business with critical mass and a relatively stable income stream.”

Indications are that both Ascendis and Bounty are set for more deal-making this year. With deal-making momentum established at both key investments, CBN wonders whether C2C might not be looking at building up a third investment leg later this year.

Watch this space.

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