JSE-listed fast-moving consumer goods producer Tiger Brands has entered into a sale agreement for the disposal of its deciduous fruit business Langeberg & Ashton Foods (LAF).

The acquiring party comprises a consortium of development finance institutions and the Ashton Fruit Producers Cooperative, which is a local cooperative of fruit growers in the Robertson, Ceres, Breederivier and Klein Karoo areas.

Tiger Brands in December 2022 announced plans to sell LAF to ensure the viability and sustainability of the business, including its more than 3 000 permanent and seasonal employees.

In line with Tiger Brands’ stated vision and strategy of growing Southern Africa’s leading consumer goods company, the majority of LAF’s products, including canned fruit and purees, are exported to markets in Europe and Asia, which are outside of the group’s identified strategic markets.

Additionally, Tiger Brands explains that the seasonal nature of the LAF business means average working capital requirements are high at about R900-million a year and the unwinding of this working capital would optimise Tiger Brands’ operating cash flows.

Tiger Brands’ subsidiary, Tiger Consumer Brands, will sell LAF as a going concern for a total cash consideration of R1 to a newly formed company established by the consortium. Tiger Consumer Brands has committed R150-million towards the establishment of a community trust aimed as socioeconomic development initiatives to benefit the broader Langeberg community.

The community trust will be able to subscribe for and beneficially hold 10% of LAF’s ownership through the consortium, which will retain the balance of the equity.

The establishment of the community trust is a notable milestone for the region, as Tiger Brands remains committed to the distribution of social and economic benefits to the community of Langeberg long after the company’s exit.

“This commitment is aligned to our values and purpose of nourishing and nurturing more lives every day,” Tiger Brands states.

The group has also committed to completing an effluent plant upgrade with a further investment of R31-million to ensure LAF continues to adhere to environmental regulations and is in line with its values of being a responsible corporate citizen.

“The conclusion of the transaction will mark a significant milestone in the company’s portfolio optimisation strategy and will enable management to deploy capital and allow focus on categories that meet our financial hurdles in terms of the company’s capital allocation framework. This will ultimately enable greater focus on the core business to ensure the delivery of sustainable growth,” Tiger Brands says.

The disposal is still subject to necessary regulatory approvals, Tiger Consumer Brands and the consortium entering into a transitional services agreement and the companies entering into a contract manufacturing agreement for the purchase of canned fruit under the KOO brand, which is sold into the Southern African markets.