Business Day Live reports that Rainbow, which is South Africa’s largest processor and marketer of chicken, will use the proceeds to fund strategic growth opportunities, including its 64.2 per cent acquisition of Foodcorp for R1.04bn.

Its 49 per cent purchase of Zam Chick from Zambian agribusiness Zambeef for $14.25 million will also be partly funded from the proceeds of the rights offer.

Rising commodity prices, inflation and surging chicken imports from Brazil have put pressure on local poultry players to diversify.

In a note to clients last week, Vunani Securities analyst Anthony Clark said Rainbow some years ago started to reduce its revenue from the commodity (individually quick frozen) side of the chicken business, shifting towards quick-service restaurants and developing its own retail value-added brands.

"The recent ZAR3.9billion rights issue saw Rainbow acquire a 64 per cent stake in Foodcorp and brings a ZAR7 billion grocery business with many number one or two categories (of brands).

"The further acquisition of a 49 per cent stake in Zam Chick enables Rainbow to move into Zambia and the neighbouring, under-serviced territories – moves into Nigeria and Kenya via Zam Chick can be expected," Mr Clark said.

Rainbow offered 276,964,802 new shares, allowing shareholders to buy 80 shares for every 100 they own at an issued price of ZAR14.20.

The rights offer was fully underwritten by Remgro, which owns 73.4 per cent of Rainbow.

"With cash on its balance sheet, Rainbow can no longer be seen as a poultry stock and thus risk is mitigated in its ownership. Management stated they intended to bed down the ZAR1.2 billion spent on Foodcorp and Zam Chick, thereafter use their cash war chest to restructure some of Foodcorp’s onerous European debt and would aggressively grow Zam Chick. Even after this, some ZARR1 billion to ZAR1.5 billion of cash would be available for acquisitions," Mr Clark said.

The Oasis Group invested ZAR460 million in Rainbow as part of the rights issue offer. Oasis, on behalf of its clients, will continue to represent 11.9 per cent of the total outstanding shares of the company.