RCL Foods, a leading South African consumer goods and milling company backed by South Africa’s richest man Johann Rupert, announced on Monday its decision to unbundle its Rainbow Chicken business and pursue a separate listing on the Johannesburg Stock Exchange (JSE).
RCL Foods, originally founded in 1960 as Rainbow Chicken Ltd, is 77-percent owned by Remgro, an investment holding company controlled by billionaire businessman Johann Rupert. The company, known for brands such as Selati sugar, Ouma rusks, and Yum Yum peanut butter, has been undergoing a strategic review to assess the sustainability and value of its portfolio for shareholders.
The move to unbundle Rainbow Chicken follows a strategic decision to focus on strengthening its fast-moving consumer goods business while separating its chicken, sugar, and Vector Logistics into distinct legal entities. Vector Logistics was successfully divested last year.
Rainbow Chicken’s resilience: Unbundling spurs growth despite Avian Influenza setback
On March 1, RCL’s board gave initial approval to formally separate Rainbow Chicken through an unbundling process. The food producer stated that the board believes this move will empower both businesses to focus on their growth goals and investment strategies more effectively, with better alignment on capital allocation priorities.
According to Rob Field, Group Chief Financial Officer, the decision to unbundle is part of the company’s shift away from “commodity non-core investment areas” to concentrate on its branded consumer products acquired through the Foodcorp purchase about a decade ago.
Despite a R184-million ($9.67 million) impact from Avian Influenza, Rainbow’s underlying earnings before interest, taxes, depreciation, and amortization (EBITDA) increased from R225.1 million ($11.83 million) to R286.8 million ($15.1 million) in the six months ending December.
Listing plans propels RCL’s shares up by 4.5 percent, signaling investor confidence
The proposed listing of Rainbow Chicken marks a significant step in RCL’s corporate strategy, aligning its business units with distinct market focuses. As the company progresses in its turnaround phase, the favorable half-year earnings report and market response indicate a promising path for RCL in South Africa’s evolving consumer goods industry.
Following the announcement of the planned listing, RCL experienced a surge in its share price by 4.5 percent on March 4, closing at R10.45 ($0.55) per share on the Johannesburg Stock Exchange. This propelled the group’s market capitalization to R9.3 billion ($0.49).
Simultaneously, Remgro shares rose by 156 basis points to R151.3 ($7.95), pushing the investment holding company’s market capitalization to R80.1 billion ($4.21 billion). The market reaction indicates investor confidence in the strategic direction taken by RCL and its potential for growth in the consumer goods sector.
