Famous Brands Cheese Manufacturing Company‚ the new joint-venture entity‚ which will be entirely independent from the existing dairy business‚ has been established for this purpose.
Famous Brands will control 51% of the company´s shares‚ with shareholders of Coega Dairy holding the balance of 49%.
In terms of the agreement‚ a new state-of-the-art cheese manufacturing plant will be constructed adjacent to Coega Dairy´s existing dairy facility‚ whose primary business is the production of UHT long life milk and butter.
Coega Dairy will supply milk to the new company‚ which in turn will produce Mozzarella‚ cheese slices and cheese spread for the group.
In the immediate term‚ Debonairs Pizza will be the company´s single biggest customer‚ with the intention to expand supply over time to the group´s other brands.
“We have signalled to the market that our goal is to grow the back-end of the business by enhancing our manufacturing capability and capacity‚ and this is another strategic step in that process‚” said Famous Brands CEO Kevin Hedderwick.
“This partnership is compelling for two reasons: the transaction comprises a straightforward greenfield investment with significant earnings potential and a short payback period‚ and equally importantly‚ it is an enterprise which will deliver tremendous benefits for those black farmers who partner with us via Coega Dairy‚ whereby they gain an instant‚ robust market for their product‚ and the potential to grow that market over time‚” he added.
Coega Dairy´s ownership comprises 19 producer shareholder farms‚ of which six are community and black-owned. The 225 farm employees employed by the shareholder farms are all historically disadvantaged individuals‚ as are Coega Dairy´s factory employees. They are also all shareholders in the dairy through the Coega Dairy Empowerment Trust‚ which has been funded by the Industrial Development Corporation.
Latest-technology equipment‚ budgeted at R35 million‚ will be imported from Italy for the custom-designed plant and will be funded by the joint-venture partners in direct proportion to their shareholding in the business. The day-to-day operations of the cheese manufacturing business will be managed by Coega Dairy for an agreed management fee.
In terms of the agreement‚ the Coega Development Corporation (CDC) will fund construction of the facility and lease the premises to the new company. Construction is planned to commence in November‚ and is expected to cost in the order of R20 million.
“By locating this business within the CDC node‚ which was specifically set up by government to attract investment‚ Famous Brands is helping to contribute to the economy of the Eastern Cape‚ one of the poorest provinces in the country. We are delighted to have the opportunity to make a meaningful difference in an area of real need‚” said Hedderwick.
“Significantly this transaction is anticipated to create 49 jobs in the new cheese manufacturing company as well as a further five jobs in the existing Coega Dairy business‚” he added.
Coega Dairy CEO Dr Hennie Kleynhans said the transaction is a fantastic coup for the farmers who own Coega Dairy. It guarantees a market for at least 38 million litres of milk per annum and will in time establish the dairy as one of the biggest in South Africa.
Article source: http://www.bizcommunity.com/Article/196/469/83129.html