JONATHAN KATZENELLENBOGEN
Privately-held Central Bottling Company (CBC), the owner of the Coca-Cola franchise in Israel and the dominant player in the country’s drinks market, is the leading partner in a group, called Milco, to buy Clover. If the deal goes through, CBC will have a 60% share in Clover.
CBC is owned by the heirs of its founder, Moshe Wertheim, who was one of Israel’s wealthiest men. Wertheim, who died three years ago at the age of 86, originally fought in the Palmach, the Jewish underground army.
He founded CBC in 1967, and also held large stakes in Bank Mizrahi-Tefahot, and a broadcasting company, Keshet. Under an Israeli law to break up highly concentrated industries, Wertheim had to sell off some of his holdings.
In response to the announcement of the buyout offer earlier this week, the local Boycott Divestment Sanctions (BDS) movement released a statement objecting to the deal, claiming that CBC was complicit in human rights abuses and violations of international law.
“BDS South Africa is currently investigating the matter, and will be meeting with our partners as well. If the deal proceeds, we will actively support and join the call for direct action and a militant but peaceful campaign, including protests and disruptions against Clover, and a boycott of all its products.
Later, the followers of the Radio Islam Twitter feed were asked, “If Israel’s Central Bottling Company acquires a 60% stake in Clover, would you consume any products from the dairy and drinks producer? The poll results showed that 253 took part, and that about 50% voted “no” they would not consume Clover products. About 45% voted “yes”, indicating that they would consume Clover products, and the remaining 5% indicated that they did not care either way.
Given the small sample size, and that people might have been confused by the question in having to vote “no” in support of a boycott, the poll is hardly a definitive indicator of views.
The Milco consortium did not respond to the BDS threat, but is most likely to have considered a boycott along with other risks in the due diligence process ahead of the offer.
Apart from CBC, the other partners in the Milco acquisition group are Brimstone, a South African-based black-owned holding company, which will hold 15%; Ploughshare, another black-owned local investment group, which will hold 11%; Incubev, a group of executives with experience in the sector, at 8%; and Clover management, with a 6% holding.
Milco views the buyout as a way to take advantage of the African opportunities generated by the growth of the continent’s middle class. The investors also see value in Clover’s large footprint in the region, and its extensive cold chain distribution system. Clover has 13 production facilities in South Africa, and distribution coverage in Botswana, Lesotho, Mozambique, Namibia, and Swaziland. The company sees export and potential growth opportunities in much of sub-Saharan Africa.
Clover employs 8 500 people, and has sizeable shares in the markets in which it competes. The company says its share of the South African pure fruit juice sales is nearly 47%. It has a 26% share of South Africa’s butter market, 23% of the fresh cream market, and 28% of the Feta cheese market.
The offer of R25 a share made on Monday this week compared to Friday’s close of R20, means the company is valued at R4.8 billion. Clover issued a cautionary announcement in October last year, which indicates that negotiations regarding the sale have taken some time.
An independent board, an independent expert – PricewaterhouseCoopers – as well as management have backed the deal, which will be put to a shareholder vote next month. The proposed deal will then face a series of regulatory hurdles before final approval.
Given its heavy dominance of the relatively small Israeli drinks segment, and its past problems with competition authorities, CBC may well be keen to acquire assets outside of the country.
The company produces and distributes a wide range of products that include a full range of Coca-Cola drinks, Carlsburg beer, fruit juices, iced tea, and Tara dairy products. According to a report in the Israeli newspaper Haaretz, CBC has a two-thirds share of the country’s soft-drink market. It has a 90% share of the country’s cola market, and a 75% share of the iced tea category. Outside of Israel, the company has operations in Turkey, Uzbekistan, and Romania.
Two years ago, CBC was ordered to pay a $17 million (R228 million) fine by Israel’s Antitrust Authority, which performs a role similar to that of South Africa’s Competition Commission.
