Humansdorp dairy plans expansion
[caption id="attachment_237132" align="aligncenter" width="630"] Woodlands Diary has signed a signifcant deal with a KwaZulu-Natal diary
Merger with KwaZulu-Natal operation will increase offerings to customers
Woodlands Dairy, one of the country’s largest milk processors, has signed a significant deal with KwaZulu-Natal’s Fairfield Dairy that will see the two major agri-processors effect a full merger over the next five years.
The Competition Tribunal announced its conditional approval of the merger between the Humansdorp operation and the Howick firm late last week.
The conditions are applicable to the fulfilment of a series of share purchase tranches which will make up the staggered acquisition. Employees’ jobs are also protected as part of the merger conditions.
Both Woodlands, controlled by prolific Eastern Cape company Gutsche Family Investments (GFI), and Fairfield, controlled by majority share owner Kevin Lang, supply milk and other dairy products nationally and enjoy supply contracts with some of the country’s leading retail chains.
For Woodlands, the deal will allow it to ramp up its value-added products business through Fairfield’s facilities while delivering on its strategic objectives which include expanding its basket of products.
Woodlands chief executive Lex Gutsche said the deal arose from efforts to expand the company’s operations.
“I was looking for an opportunity to expand our business with particular interest in growing our value-added products portfolio.
“I engaged an agent to explore two prospective companies and it became apparent that Fairfield Dairy was on the market,” Gutsche said.
“Kevin Lang, the majority owner, indicated his willingness to sell to us and we structured a deal whereby we will acquire 100% of the shares of his company over a five-year period.
“This enables us to learn about his business from him over a period. The first tranche will buy us 40% of the company.”
Woodlands would acquire the first tranche of shares within about a month.
“Within two years thereafter we must exercise our right to acquire a majority share in Fairfield.”
Gutsche said he was not at liberty to disclose the value of the deal.
Acknowledging that Woodlands shared some key customers with Fairfield, he said the two businesses were a great fit in that Fairfield would complement Woodlands’ range of products and so would enhance the company’s product range and customer offering.
Gutsche framed the deal as a matter of quality over quantity.
“Fairfield Dairy’s product portfolio is a superb one with predominantly value-added products, as opposed to our range which has more of a commodity nature with some value-added products.”
Questioned about the effect the deal would have on Woodlands’ national footprint, the chief executive said he did not foresee any significant difference from a distribution perspective.
“Woodlands Dairy already has national cover as does Fairfield as they distribute into the DCs (distribution centres) of national retail structures, so I don’t see a big difference ensuing regarding distribution,” he said.
“A major aspect for us will be to be able to contract-pack First Choice [Woodlands’ brand] value- added products at the Fairfield facility that we currently don’t manufacture in Humansdorp.
“Obviously our penetration into the KwaZulu-Natal region will be enhanced through this acquisition.”
Gutsche said each business would continue to run independently and under its own name.
“There will be no changes to management structures in the foreseeable future.
“We will have two positions on the board initially which will enable us to learn the business first-hand and also influence strategic direction,” he said.
“We are extremely excited about the deal, which makes absolute sense to our strategic plans to be a more complete dairy company, supplying a full range of dairy products to the market.”