The purchase consideration is R7.3-million, which will be settled from cash reserves. The effective date of the transaction is July 1, 2012.
Manufacturing capability to increase
Famous Brands’ CEO, Kevin Hedderwick says: “This acquisition is in line with the Group’s stated strategy to expand its manufacturing capability. The short term intention is to overlay Famous Brands’ business model on the existing Java Lava operation and to extract obvious synergies whereby Java Lava will become a focused manufacturing facility with all peripheral services being integrated into Famous Brands.”
He adds: “Moving forward, the goal is to create a specialist coffee company which will be a source of coffee and related hot beverage product supply to the Group’s franchised network and will also facilitate taking certain of Famous Brands’ franchised brands to the retail market.”
Hedderwick explains: “Over time, the strategy is to shift Famous Brands’ existing coffee and related beverage business into the new joint venture. The Group has a strong portfolio of franchised coffee brands which include Wimpy, Mugg & Bean, tashas, Vovo Telo, Milky Lane and Juicy Lucy, and this acquisition will afford both businesses a win-win outcome.”
Established in 2007, Java Lava is currently owned by partners Brian Best, Steve Giddings and Nohlene Bennett, and employs 18 staff and three regional agents. The business is housed in a purpose-built facility in Sunderland Ridge, Centurion, and roasts in excess of 20 tons of beans per month and produces eight tons of hot chocolate monthly. Java Lava’s facility has Food Safety Assessments (formerly SAFSIS), kosher and organic accreditations.
New plant planned
A further R7-million, also sourced from cash reserves, will be incurred to equip and extend Java Lava’s existing capacity to take on the Group’s volumes. It is anticipated that the new plant will be in a position to commence with integration of certain parts of the Group’s business in July 2012. Once fully integrated, this acquisition will position the company as one of largest coffee roasting businesses in South Africa.
Hedderwick notes: “We will be retaining the skills and services of Brian Best and Steve Giddings; Brian, a coffee business veteran with more than 15 years’ experience in the industry, will continue to manage the business on our behalf; Steve will consult in terms of strategy and product formulation.”
Best and Giddings comment: “Java Lava has always had great ambitions, and partnering with an established leader in the food services sector will enable us to expand our horizons. The new business will have significant advantage in an industry that benefits strongly from high profile brands, quality and scale. Java Lava offers entrepreneurial management, an accredited modern facility, production capacity, and a lot of passion and experience. By focusing on the synergies that exist between Famous Brands and Java Lava, the opportunity to be a major player in the industry is significant.”
Licensed product range to be extended
Hedderwick concludes: “The compelling rationale for this transaction aligns with our deliberate strategy to build manufacturing capability and to pursue acquisitive growth not only at the front-end of our business, via our best-in-class brands, but also at the back-end in terms of robustly examining opportunities to expand the range of licensed products which we can manufacture on behalf of our branded franchised network.”