TENSIONS have ratcheted up markedly following last month’s story on dramatic ownership changes at Quantum Foods – the Wellington-based poultry, egg and animal foods producer.
It did not take long for Bloemfontein-based poultry producer Country Bird Holdings – which acquired a 31% stake in Quantum from PSG-aligned Zeder Investments – to flex its muscles.
CBH – which holds lucrative supply contracts with large fast food companies – called for a meeting of shareholders to consider nominating a new director to the Quantum board.
But Quantum declined to convene the meeting – citing legal opinion obtained over the eligibility of the candidate proposed as a director by CBH. CBH, at this stage, has not revealed the identity of their nominee…although CBN understands the person doesn’t have links to the local poultry sector.
At the time of going to press CBH was reportedly re-considering its options – which would probably revolve around nominating a different director to the Quantum board.
At face value it would seem, Quantum has – for the moment – managed to build a defence against CBH – which is perceived as making a hostile advance on the group.
It would appear that offshore investment entity Silverlands – which recently acquired a 32% stake in Quantum – might be working together with other major shareholders like Astral Foods (the country’s biggest poultry producer) and the group’s directors (including chairman Andre Hanekom and CEO Hennie Lourens).
Talk around agri-sector sources is that the smart money is backing CBH to talk away from Quantum.
That said, rumours suggest that CBH had grand plans for Quantum. CBH last month also acquired the Enterprise processed meat business from Tiger Brands, and seems determined to build a larger business around affordable protein sources.
It has been speculated that CBH might have considered reverse listing onto the JSE through Quantum – a deal to would create a formidable food sector player.
If CBH is frustrated in its attempts to engage constructively with Quantum around future strategy, one option might be to sell off its shareholding to Astral. Such a move would bank a neat profit for CBH, but it is debatable whether this would compensate for the larger strategic plans the company had for its Quantum investment.
It has been reported that Astral has recently bumped up its initial 6% stake in Quantum to close to 10%.
Quantum is of huge strategic importance to Astral. Astral has previously raised issue with CBH acquiring a strategic stake in Quantum – suggesting that the current broiler supply agreement with the company could be jeopardised over the long-term.
Quantum supplies roughly 30% of Astral’s live broiler chickens processed in the Western Cape. Quantum has a similar agreement with Eastern Cape-based poultry producer Sovereign Food Investments.
The gist is that Astral would need to make a considerable investment in its own production capacity if it needed to replace the lost supply agreement with Quantum. Quantum, to date, has been a reliable partner in the arrangement.
In its last financial report, CEO Hennie Lourens said volumes of day-old chicks increased by 4.1% and overhead costs were well managed. “Although the breeder section of this business is still under pressure, we saw an improvement in the performance of the recent grandparent genetics received.” He said commercial broiler performance remained at a very high level.