www.lonrho.com
Lonrho is a pan-African company with a diverse portfolio of investments focusing on Africa. Its investments range from primary infrastructure to transportation, support services, hotels and natural resources. The Company is focused on servicing Western investment and African business by investing in emerging sectors across Africa, creating hubs of business through key investments. Lonrho is re-establishing a significant presence on the African Continent through strategic investments across sectors in fast-growing African economies.
Lonrho’s latest acquisition is an excellent strategic fit, says Panmure Gordon
Lonrho’s (LON:LONR) newly acquired food export business is an excellent strategic fit, according to Panmure Gordon analyst Damian McNeela.
This morning the London-listed African conglomerate unveiled a £4.5 million deal to acquire a leading airborne export business Grindrod PCA.
The deal adds vital export and logistics infrastructure to the Lonrho agri-business, which is trying to grow to meet high levels of demand from major international food retailers. Grindrod PCA, headquartered at Johannesburg International Airport, is a leading exporter of fruit, vegetables and fish into the global market.
Panmure analyst, McNeela said: “We believe that the acquisition will make an excellent strategic fit with Lonrho’s existing agri-distribution business, Rollex.
“The combined scale of Grindrod and Rollex, which is likely to be the largest air freight distributor of fresh produce in South Africa, should also allow for improved freight rates with international airlines and allow for improved purchasing, driving synergy benefits.”
Crucially McNeela points out that Grindrod PCA’s airside apron access will be a welcome efficiency boost to the Rollex business.
In a note to clients the analyst repeated a ‘Buy’ recommendation with a 23p price target, which suggests the potential for a 35 percent rise from the current price of 17p.
This morning’s deal is the acquisitive conglomerate’s latest add-on within its agriculture business unit, following on from last month’s acquisition of South African fish processing and cold store business, fish-on-line.
"This is a good strategic acquisition for Lonrho, making us the largest distributor by air of fresh produce from Southern Africa to the global marketplace in a sector we see as having strong growth potential,” said chairman David Lenigas.
“The Grindrod PCA business provides us with additional expertise to ensure we can meet customer requirements and the high fulfilment levels we target for our expanding agri-division.
“The opportunities for Africa to further develop its agricultural output and supply produce to the booming African market and the growing export market are significant and this acquisition places Lonrho at the forefront of meeting this demand."
Grindrod PCA’s existing management team stay on, to operate the business on a day to day basis, and the business will be integrated into the Lonrho group where it will add value to the other agri-logistics companies.
“Lonrho is seeing increasing demand from global retail chains in the USA, Europe and the Far East for fresh produce from Southern Africa as retailers seek new sources of supply to meet increasing global sales,” the company said.
“There is growing demand from the increasingly affluent one billion potential consumers in the domestic African market and from the expanding export market for opportunities for Africa to help to meet global demand.”
Specifically the acquisition adds cold store capacity, it will allow for more efficient handling of perishable goods and it will create potential cost savings. Grindrod PCA operates international standard cold store and logistics facilities in Johannesburg, Cape Town, Port Elizabeth and George.
Lonrho’s vertically integrated agri-business already comprises several companies that grows, packs and delivers food produce to retailers both in Africa and around the world – with major supermarket clients in USA, Europe and the Far East.
