Rainbow Chicken CEO Miles Dally. Picture: FINANCIAL MAIL
Miles Dally. Picture: FINANCIAL MAIL

RAINBOW Chicken aims to raise as much as R3.9bn in a rights offer to fund its acquisition of Foodcorp, which is South Africa’s third-largest food producer.

The proceeds from the rights offer will be used to fund the takeover, as well as other strategic growth opportunities, Rainbow said in a Stock Exchange News Service announcement.

Rainbow said in the statement on Thursday that upon the successful completion of the Foodcorp acquisition, the consolidated debt of Rainbow would be significant and that the rights offer would ensure that the consolidated capital structure of the group was appropriate, with flexibility to pursue strategic growth and development opportunities.

The company plans to offer 276,964,802 new shares, allowing shareholders to buy 80 shares for every 100 they own at an issued price of R14.20.

The rights offer will be fully underwritten by Remgro, the investment holding company of the Rupert family, of which Rainbow is a 73.4% subsidiary.

Last month, Rainbow, which is South Africa’s largest processor and marketer of chicken said its 64.2% buy-out of Foodcorp for R1.037bn would enable it to broaden its range of brands and categories to counter the cyclical nature of the food industry, and become a food player with significant scale.

Foodcorp’s range of products includes Yum Yum peanut butter and Ouma Rusks.

The company also manufactures and sells convenience, ready-to-eat products for Woolworths and other retailers.

Foodcorp, which typically sells around 200-million loaves of bread and 120-million pies a year, saw revenue for the year ended August 31 amount to R6.9bn.

Analysts have lauded the deal, saying it allows the group diversification away from the dire prospects of the poultry business, where rising commodity prices, inflation and surging chicken imports from Brazil have put pressure on local poultry players.