Tiger makes formal bid for AVI

Madoda Milazi

Madoda Milazi

Branded food company Tiger Brands yesterday finally put forward a formal offer to buy consumer goods group AVI, which ended months of speculation about the possible deal.

When news of the takeover bid first surfaced in November, AVI chief executive Simon Crutchley issued a statement saying AVI had neither received a formal offer from Tiger Brands nor was it in negotiations with the company.

Both companies issued cautionary statements yesterday alerting their respective investors to the pending deal, but declined to comment, referring all queries to their statements.

Christopher Gilmour, an analyst at Absa Investments, said the proposed deal made a lot of sense, especially from Tiger Brands' perspective.

He said: "The two groups complement each other well, with very little overlap. Tiger Brands needs some new growth opportunities and AVI's businesses, with a few exceptions, are higher growth entities than Tiger's.

"Such a deal would also help to improve Tiger's image, recovering as it is from the problems it encountered with bread price fixing and other collusions."

Since the first announcement of Tiger's interest in AVI, the AVI share price strengthened considerably. Tiger Brands' share price, on the other hand, has declined since the announcement.

"Only when Tiger Brands and AVI have sat down together and thrashed out a firm bid, will we know what the full implications are. From there, shareholders will have to vote. It will also have to pass the scrutiny of the competition authorities," said Gilmour.

He said AVI valued its independence and would probably hold out until the bitter end.

"But there is a price for everything. It will be interesting to see if Tiger Brands can manage to sweeten the proposed deal sufficiently to persuade AVI's management and shareholders to accept it," Gilmour said.

He said the only odd business in AVI was shoe retailer Spitz.

"Although it's a good company and has some excellent growth prospects, in our opinion it has no place in an integrated food company," he said.