Tanzanian firm to take over Blue Ribbon Blue Ribbon Foods branch in Bulawayo
Blue Ribbon Foods branch in Bulawayo

Blue Ribbon Foods branch in Bulawayo

Harare Bureau
TANZANIAN milling giant, Bakhresa Group, will assume control of Blue Ribbon Industries by December, subject to regulatory approvals for the transaction.

This will result in all shareholders, including a management consortium Orchadrian Enterprises, losing their entire interest, as the company was insolvent.

Blue Ribbon is currently owned 74 percent by Orchadrian Enterprises, 16 percent by Cereal International Limited and 10 percent by an employee ownership Trust.

Bakhresa is set to immediately inject a total of $20 million towards recapitalisation, clearing liabilities to creditors, workers and financial institutions.

The investment will also cover the cost of retrenching workers deemed excess to requirements while $6 million will instantly go towards capital expenditure.

Blue Ribbon is saddled with a total of $29,4 million liabilities made up of $2,4 million owed to PTA Bank, $1,15 million to FBC Bank, $7,4 million to Atlas Trading, $1,171 million to preferrent creditors, $696,001 statutory obligations, $7,6 million to ZB Bank and $8,8 million owed to concurrent creditors.

A further $20 million capital would be invested into the financially distressed miller over a period of five years to replace old and antiquated equipment.

“The investment required to operate the business and carry out renovations and upgrade plant and equipment will amount to $40 million within a short period,” reads part of BRI’s scheme of arrangement document.

This will take BRI’s capacity from an average of 35 percent to about 100 percent. It should operate at 45 percent to break even and over 60 percent for good margins.

Bakhresa Group vice President Ramesh Kumar said investment over the next five years will target plant and equipment and new buildings to house new plants.

Creditors and members of the financial institution met in Harare yesterday to consider the investment and resuscitation of BRI in terms of a scheme of arrangement. But results of the voting process were to be announced in due course.

BRI judicial manager Reggie Saruchera said that the transaction for acquisition of the company should be done by September and takeover by December.

BRI has been operating at 11 percent to 29 percent since 2009 due to funding constraints. Production improved when BRI signed a raw material supply agreement with Mega Market to produce and maintain product visibility.

Saruchera said “we want to begin implementation (of the deal) in earnest by September. We might need more time to finalise handover-takeover with Mega Market for them to clear whatever they are owed,” he said.

The handover takeover process, Saruchera said, would take about three months from September, but the whole process should be done by December.

The transaction has already received indigenisation approval from the government and awaits approval from the Reserve Bank and Zimbabwe Investment Authority. Saruchera said the transaction would have been closed within six months had it not been for delays in getting the indigenisation certificate.

“ZIA chairman Nigel Chanakira has assured me that we will get our certificate this Friday. The Reserve Bank of Zimbabwe is also in the loop, they indicated that they are standing ready to give us the approval,” he said.

Saruchera said they had settled on Bakhresa because the Tanzanian milling giant possessed the financial wherewithal required to turnaround Blue Ribbon.

“Blue Ribbon is a company which requires real money; just to buy maize, probably requires $10 million to $15 million to get it running at full capacity,” he said.

The Tanzania miller beat competition from Grindrod and Takura Capital, which proposed to acquire selected assets and inject $8,5 million and $7,5 million, respectively. BRI was put into judicial management in 2012 due to liquidity issues.

The company is Zimbabwe’s second biggest food and milling firm. Its unit, Blue Ribbon Foods is a milling and stock feed manufacturer.

BRI also owns Nutresco, which produces peanut butter, corn soya blend, mahewu and soya chunk. BRI’s other unit, JA Mitchels runs bakery operations.

Bakhresa has operations spread across a number of African countries including Tanzania, Uganda, Rwanda, Zanzibar, Kenya, Burundi, Malawi, Mozambique and South Africa, where the group has recently spread its tentacles.

 

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