Market sources say officials from Tiger Brands have been in and out of the country to carry out a due diligence examination into Lobels and recently toured the operations of the company.
Lobels resident director and acting CEO, retired Brigadier General David Chiweza, on Wednesday would neither confirm nor deny his company was in talks with Tiger Brands.
He said: “All I can say is I will neither confirm nor deny that. At this stage, we have very confidential negotiations. We are in an equity mobilisation programme and in discussions with various people.”
But sources say Lobels shareholders will sell a 49% stake in the company for around US$10 million in a bid to raise capital for the troubled bakery.
The sources added that shareholders had opted to retain control in Lobels in line with the country’s empowerment laws that compel foreigners to sell 51% stake in businesses valued at US$500 000 or more.
This comes after Lobels was shut down owing to cash flow and raw material problems that have seen workers striking.
A Lobels audit earlier in the year further exacerbated its woes after a huge hole in the books was unmasked. Then Lobels CEO, Burombo Mudhumo, was forced to quit after the audit report was presented to the board.
Chiweza told businessdigest that Lobels would soon conclude the deal and had received interest from “various” people for the company’s 49% stake.
Lobels was founded over 60 year ago and diversified into confectionary. From the original plain range of biscuits, Lobels developed a cream range, then a chocolate-coated range and a savoury selection was added.
Biscuits had become the company’s core business in the country with exports throughout the region.
But of late the company has been losing market share to competitors such as Innscor’s Bakers Inn and Harambe’s chain of bakeries on both the bread and confectionary business.
Listed on the JSE, Tiger Brands Ltd is a fast-moving consumer packaged goods company that operates mainly in South Africa and selected emerging markets.
At its peak, Lobels employed 600 people. The company was sold to a consortium of black businesspeople comprising FBCH CEO Livingstone Gwata, Caps Holdings Ltd chairman Fred Mtanda, FBCH chairman Herbert Nkala and Chiweza.
Tiger Brands Ltd, South Africa’s largest food company, this week announced it had formed a venture in Ethiopia and agreed to buy biscuit-maker Deli Foods Nigeria Ltd to diversify earnings away from its home market.
The company is pushing for a presence outside South Africa.
With Tiger Brands’s deep pockets, analysts see Lobels clawing back market share should the deal be concluded.