Tinashe Makichi, Business Reporter
Zimbabwe’s stockfeed manufacturing giants, National Foods and Profeeds are planning to set up a new stockfeed company which will be run as a separate entity.
The move is expected to ensure that the groups utilise their capacity to the fullest while it will help boost against competition from impeding recapitalisation of two of its major competitors; AgriFoods and Blue Ribbon Industries.
The company; African Feed Mills Private Limited will be 60 percent owned by Profeeds while National Foods will take up the balance.
Under the arrangement the two stockfeed manufacturing companies will sell their respective stockfeed manufacturing assets and lease their immovable property to the new company for purposes of manufacturing stockfeed.
The total transaction value is estimated at $10 million.
According to documents seen by the Herald Business, both National Foods and Profeeds will shut down their stockfeed manufacturing units.
“The proposed transaction is not a classical merger. The two entities National Foods and Profeeds shall not cease to be distinct. National Foods and Profeeds shall remain separate, independent operating companies, effectively competing in the wholesale and retail market for stock feed,” reads part of the documents.
In the event that in the future, parties decide to exit the stockfeed business completely, the new company will manufacture as well as wholesale and retail stock feed.
National Foods and Profeeds will also maintain their main line of business other than stock feed, independently of each other.
However the merger is in that NatFoods and Profeeds shall sell their respective stockfeed manufacturing assets and lease their immovable property to the new company, for purposes of manufacturing stock feed.
The shareholding, in each of t businesses shall remain the same and shall not be affected by the proposed transaction.
On Profeeds, managing director Nigel Philp told the Herald Business in February this year that the company has plans to increase production from the current 10 000 tonnes of stock feed in 2016.
He said the group is aware of the drought but has devised mechanisms that will enable the stock feeds business to run consistently.
“Our biggest aim is to become a manufacturing conglomerate because the future of Zimbabwe hinges on the development of the agriculture sector and then moving into manufacturing.
“There is hope in this country’s prospects for the future and because of that hope we have trained about 8 000 small scale poultry producers and empowered them as well,” said Mr Philp.
ProGroup has already invested about $6 million on constructing a new plant for Profeeds while an additional investment was put towards construction of fish feed manufacturing plant.