JSE-listed consumer goods group RCL Foods has received approval from its directors to unbundle and separately list the Rainbow Chicken business on the JSE.

RCL first announced its intent to pursue a formal separation of its poultry operation in March, which would enable both businesses to pursue their respective growth ambitions.

The company added that the separation of the Rainbow business would enable investment in a focused manner for both RCL and Rainbow, with improved alignment on capital allocation priorities.

RCL explains that the unbundling will be implemented by way of an in specie distribution by RCL of all the Rainbow shares held by it, comprising 100% of the Rainbow shares in issue to shareholders in the ratio of one Rainbow share for every one ordinary RCL share held by shareholders.

Although the unbundling does not require shareholder approval, as per the listing requirements of the JSE, it does require approval by the Financial Surveillance Department of the South African Reserve Bank and the JSE.

RCL says it is confident Rainbow can further improve its profitability as a standalone business, particularly as it has already made strides in delivering on its strategy to restore through-the-cycle profitability by means of an appropriately structured operational base.

“The responses shown by Rainbow, particularly in relation to the successful implementation of a change of its chicken breed in the current financial year, which involved a significant change to the genetics of its breeding stock; and improved operational resilience in the face of significant headwinds experienced recently, have considerably demonstrated the benefits achievable from an improved operational base,” RCL notes.

RCL will provide more details in a pre-listing statement on the Rainbow share distribution once the JSE has granted the necessary approvals, which is expected by June 10.

The company expects the unbundling to be effective by July 1.

RCL’s share price on the JSE rose by more than 11% following the news that its board had approved the delisting.