South African merger to create listed investment champion

Overberg Agri and Acorn Agri, which is backed by local firms African Rainbow Capital and Sanlam, are each valued at more than $180m.

Two Western Cape-based groups have agreed to combine their assets to establish a South African agribusiness investment champion.

In a circular sent to shareholders, Overberg Agri said it had “entered into an amalgamation agreement” with Acorn Agri to create “a unique leading national agriculture and food investment company.” In an accompanying letter, Overberg chairman Douw de Kock added that the combined business will list on the Johannesburg Stock Exchange in the near future, “if conditions are favourable.”

KPMG, which carried out an independent valuation as part of the proposed transaction, priced Overberg at between 2.1 billion rand ($180 million; €144 million) and 2.3 billion rand, while Acorn Agri is valued at between 2.2 billion rand and 2.35 billion rand.

Under the agreed transaction, Acorn Agri will cease to exist, with its current assets coming under the new entity, Acorn Agri and Food. Acorn PE will continue to provide fund management services to the group.

“The combined business will hold an attractive blend of local- and export-orientated businesses with exposure to export earnings which hedges shareholders against rand devaluation and local economic and political challenges,” de Kock said.

The move comes in the wake of significant political turmoil in South Africa – president Jacob Zuma resigned yesterday – as well as crippling drought in the Western Cape. Neither Overberg nor Acorn Agri responded to requests for comment.

Known quantities

Founded in 2014, Acorn Agri is an agribusiness and food-focused fund run by Acorn Private Equity, a private equity fund manager established in 2009. Its main shareholders are African Rainbow Capital, an investment vehicle started by billionaire Patrice Motsepe, and Sanlam, a financial services firm.

Acorn Agri is already a significant shareholder in Overberg, having acquired a 25.6 percent stake in 2014 from Thembeka Capital, an affiliate of PSG Group that has since been wound down. Its other portfolio companies include fruit marketers ACG Fruit, Grassroots Group and Montagu Dried Fruit and Nuts, as well as Lesotho Milling and diversified agribusiness BKB.

Overberg’s operations cover grain-storage services, machinery, financial services, retail facilities and packaging solutions. It also holds stakes in Boltfast, Bontebok Limeworks, the Bredasdorp Abattoir and Moov as well as a 2.1 percent share of Johannesburg-listed Pioneer Foods, valued at 600 million rand.

The Acorn and Overberg teams are well known to each other: Pierre Malan, a co-founder of Acorn PE, helped BNK Landbou Groep and CRK Landbou to merge in 2004, creating Overberg.

After being established in 2009, Acorn PE also provided corporate finance and advisory services to Overberg, assisting the group in its acquisition of Graanboere Groep as well as interests in Moov and Agricultural Packaging Proprietary. Two Acorn PE executives currently serve on Overberg’s board.