Universal buys BCE to expand exports to Africa

The purchase is intended to allow Universal to focus on exports and give the company exposure to African markets.

"Currently, Universal's trading exposure is limited to South African food retailers, but growing export revenue - primarily into the rest of Africa - remains a strategic objective," it said.

Universal manufactures and supplies baking systems and refrigerated wares to the perishable foods sector, while BCE supplies catering equipment.

BCE's catering equipment - which includes kitchen utensils, industrial cookware and commercial appliances - is sold throughout Africa and the Indian Ocean islands.

All-round improvement

Gaff Khan, Universal's chairman, said last year was a difficult one for the company and the acquisition of BCE was aimed at improving overall business.

"Trading conditions in 2009 were far more challenging than those experienced in the preceding years," Khan said. "However, food retail remained resilient relative to other sectors of the economy.

"Historically, exports have predominantly been through supplying to local customers embarking on international expansion, and have represented a small percentage of the refrigeration business revenue," he said.

Seeing results

Khan said the African export market had started to yield results, with export revenue increasing to R42m from R14m in 2008.

He said the challenges that Universal faced last year were indicative of the South African economy.

"In the year under review the South African economy contracted and experienced significant job losses, with consumer spending reflecting the general strain being felt in the economy.

"This resulted in a high level of uncertainty in the business community, which, among other things, led to a decline in property development and a delay of capital projects."

In terms of the details of the Universal-BCE purchase, it would be funded by Investec, vendor funding and available cash resources within the Universal group.

In terms of protocol, the acquisition agreement contained warranties and requested that BCE not undertake competing ventures for five years.

Source: Business Day