New Biscuit Manufacturers

Purchase of Monis Plant by Bakers Ltd

When Monis bought their four plants they had acquired another modern biscuit line of machinery in cases.  These cases had not been opened and the machinery was still in storage.  We were expanding in our Isando plant and needed another line of biscuits to supplement the two lines already running.  Several times I had approached Mr John Moni asking if he would sell his stored machinery to us as he was not using it, but he never showed any enthusiasm nor any interest in selling it to us.

A year or so later the Managing Director of our Isando biscuit plant, Mr L W Allen,  said that he had heard that Mr Moni was now in the mood to sell his cased equipment and suggested that I should approach him.   I telephoned Mr John Moni and arranged to travel to Isando in the Transvaal to meet him and discuss this matter.  This was done on 17 November 1977 in a very cordial manner over a cup of tea in his office bearing in mind that we now knew each other fairly well.  During the conversation Mr Moni suggested we should make him an offer for all his plant.  He said he was thinking in terms of R1.5 to R2 million for the whole company, which would include the boxed plant.  This came as a surprise.  I told him I would like to think about it and would give him a telephone call in about two weeks time to let him know our views.  I picked up the impression that he was keen to sell.

I was able to build up a picture of what was happening.   Firstly, Mr Moni’s vans were becoming overloaded and the smooth delivery operation of his farinaceous side was being affected by the added deliveries of biscuits.  He probably was not giving the service to his customers that he should.  Undoubtedly he would have to expand his fleet.   Secondly, I became aware that he was looking for extra space for increased pasta production and this could be achieved by removing the biscuit plant.   He had already dismissed his Managing Director and was thoroughly fed up with the whole biscuit operation.  Thirdly, he was probably not making a profit.

There was probably one other problem which could have very difficult repercussions.  The wages in the biscuit industry were probably the highest in any food industry, and Mr Moni now had in his factory highly paid new men doing work of a similar nature to his old employees on the pasta side at lower wage rates.   The biscuit trade union would be watching carefully to make sure he was paying biscuit wages and would probably be insisting that the wages of his van employees should be increased if they had a combined load of pasta and biscuits to bring them in line with biscuit levels.   He probably faced a deal of unhappiness all round and a possible need to increase his wages costs on his pasta operations.

We finally agreed that we would draw up an offer, but I warned Mr Moni that it would not be a very attractive one from what I had seen, but he did not seem concerned.

The deal was to purchase Fino Food Industries Limited, which was the biscuit manufacturing company.  The company owed Fatti’s & Moni’s R1 689 000.  Fatti’s & Moni’s were to pay in another R311 000 into Fino Food Industries, raising the total indebtedness to R2 000 000 and then would cede this loan to us for R1 000 000.  We would then pay Fatti’s and Moni’s approximately R40 000 for the company and we would be responsible for moving the plant from the premises.

I noted that his Balance Sheet for the twelve months ended 31 January 1978 showed an after tax profit of only R13 101.00.  The Balance Sheet for the two months ending 31 March 1978 showed a loss of R70 000.00.

The company would end up owning the four operating ovens and the new oven still in its box, various inventories of about R460 000 and cash of approximately R311 000.  There would be no debtors or creditors.

Other considerations were that we would have to purchase 20 000 sacks of flour per annum for about ten years and that Fino could continue to hold a licence for ninety Bantu employees.  At that time it was not possible to employ further Bantu on the Witwatersrand except with government consent.  There were also certain tax allowances that had accrued, and there was an assessed tax loss, which would be to Fino’s continuing benefit.

It was an exceptionally good deal but rather a complicated agreement, so I made a point of visiting Mr Moni’s office again to explain the nett effect of the transaction because I was worried there might be some misunderstanding.  He said he fully understood the position, knew the ramifications and was quite satisfied with the document we had drawn up, so we went ahead with the purchase, the date being 1 April 1978.

I am sure all the biscuit manufacturers were delighted that we had bought out Monis because they knew trading would return to normal and they could become profitable again.

The interesting thing about this transaction was that we had at no time considered attempting to buy the Monis biscuit operation.  The suggestion had come from Mr John Moni.