Following an investment period of almost five years in DFM, Sphere initiated a formal exit process in late 2011. After a tender process, the preferred bidder Horizon Equity made a successful offer for the business and completed of the transaction in June 2012.
Strong growth along with the fact that DFM’s margins and cash generation were significantly higher than other listed packaging companies made DFM an attractive target for potential buyers. This allowed Sphere to successfully exit the business in June 2012, producing an excellent rate of return for investors.
Sphere first invested in DFM in 2007 as the company was a well-established business in a strong growth industry. DFM had distinguished itself as the leading supplier of moulded natural fibre packaging to the egg industry with over 15 years of experience. South Africa’s low per-capita consumption of eggs and the price competitiveness of eggs compared to other protein products increased the scope for growth in the egg industry. The introduction of Sphere’s 42.6% BEE stake thus enhanced DFM’s competitiveness. Sphere played a significant role in enabling DFM’s management team to expand capacity and increase competitiveness. This allowed the business to operate more efficiently, generating strong cash flows.
Commenting on the role that Sphere played in DFM’s business, CEO Godfrey Sabido says “As I was a new CEO and Sphere was the new investor, we started a journey together as trusted allies. In all my dealings with the company I found them to be supportive, calm, mature and wise. They allowed us the freedom of independent management yet also empowered us and played a large strategic role in growing the business.”