Business legend Brian Joffe founded industrial conglomerate Bidvest in 1988 with a deceptively simple formula: buy entrepreneurial businesses, give management autonomy and build scale through bolt-on acquisitions.
Under his stewardship, Bidvest produced one of South Africa’s greatest acquisition-led value-creation stories. Steiner in services, Safcor and Rennies in freight, Waltons in office products and McCarthy in automotive built the domestic platform, while the acquisition of Booker Foodservice in the UK and a string of overseas deals transformed foodservice into a global powerhouse.
Joffe’s departure as Bidvest CEO in 2016 coincided with the unbundling and separate listing of its foodservice business as Bidcorp. Despite both companies emerging with almost identical earnings of about R10 a share, Bidcorp closed its first day of trading at an exuberant R304, against a far more modest R118.55 for Bidvest.
The gap reflected more than different growth prospects. This was the height of the era of president Jacob Zuma, months after Nenegate, with South Africa facing weak growth, rising interest rates and the threat of a sovereign downgrade. The rand had also fallen sharply. Bidcorp offered predominantly offshore earnings, while Bidvest was overwhelmingly exposed to South Africa Inc.
What followed illustrates the importance of starting valuation. Bidcorp proved the superior growth business, increasing earnings by about 150% over the next decade, against about 77% for Bidvest. Yet its share price rose only 47%, from R304 to R446, while Bidvest almost doubled, from R118.55 to around R230.
Of course, Bidcorp began life on an earnings multiple of nearly 28, compared with Bidvest’s 11. Today the respective multiples are closer to 16.5 and 12.3. Bidcorp has been the far better earnings compounder, but has spent the past decade growing into the rich valuation investors placed on its offshore exposure in 2016.
Much of Bidvest’s outperformance came early, however, and investors have cooled on the share over the past seven years. Earnings rose about 38% over the period, yet the share price has barely moved from its about R220 pre-Covid level. Dividends lift the total return, but this has hardly been a classic Bidvest compounding story. Even solid 2026 results failed to spark a rerating, with the shares slipping from R237 before the release to about R230.
The main concern is declining returns on capital. In 2019 Bidvest generated an 18.4% return on invested capital (ROIC) against an 11.7% cost of capital, while net debt was just 0.9 times ebitda. Today ROIC is 13.4% and leverage 1.9 times. Bidvest has grown, but at the cost of heavy acquisition spending and a more geared balance sheet.
Ironically, much of the post-Bidcorp era has been spent rebuilding Bidvest’s international exposure. The playbook is reminiscent of the old foodservice expansion, only this time hygiene and outsourced services are the growth engines. Noonan in the UK and Ireland was acquired in 2017, followed by PHS in the UK, Ireland and Spain in 2020, BIC and Consolidated Property Services in Australia in 2022 and 2023, Rental Hygiene Services in Singapore in 2023, and Citron in the UK and North America in 2025. These larger platform acquisitions were supplemented by a steady stream of smaller bolt-on deals, used to add scale, extend geographic reach and strengthen the acquired businesses. From 2020 to 2025 international operations increased their contribution to trading profit from 14% to 30% on a pro forma basis.
There are signs that Bidvest’s second internationalisation is working, though CEO Mpumi Madisa concedes in an interview with the FM that progress has been uneven. Hygiene, which provides recurring washroom services, including sanitary waste collection, dispensers and consumables, is the standout. Madisa singles out returns from PHS as “excellent” and calls the integration of Citron’s UK operations a game-changer. That has helped drive hygiene trading profit up 18% in constant currency, lift margins to 18.7% and increase the segment’s contribution to 54% of Bidvest Services International’s trading profit.
Australia has proved more difficult, with Madisa acknowledging that more work needs to be done at the merged BIC Consolidated business. Its operations are weighted towards facilities management and contract cleaning, generally more labour-intensive and competitive than hygiene, and profitability has been hurt by contract losses and restructuring. Management says most of that pain is now in the base, with contracts won late in financial 2026 expected to begin contributing during 2027.
Citron’s North American operations are at an earlier stage of their growth trajectory. It delivered in line with budget despite investment in new branches and sales capacity, while much of the procurement upside from plugging it into Bidvest’s global purchasing of dispensers and consumables still lies ahead.
The 2026 numbers were better than the share price response suggests. Revenue rose only 2.9% and organically just 1.5%, but trading profit increased 8.4% to R13.1bn as the margin improved from 9.5% to 10%. Cash generation was the standout — R17.2bn from operations, R12.5bn of free cash flow, 109% cash conversion and a R4bn reduction in net debt.
There are several high-quality assets elsewhere in the portfolio. Bidvest Freight generated R2.3bn of trading profit at a 25.3% margin, helped by stronger grain, liquid and mineral volumes. Bidvest has renewed the 25-year operating licence and lease for its bulk liquid terminal at Durban’s port and sees further opportunities as Transnet opens more port infrastructure to private operators, while improved rail performance should lift cargo flows through its terminals. It has already approved R2.5bn of expansion capex, including R1.6bn for a second liquefied petroleum gas terminal at Richards Bay, with commissioning targeted for about 2029.
Bidvest Commercial Products was another strong performer, with trading profit up 27%, helped by plumbing wholesaler Plumblink, electrical distributor Voltex, stronger renewable energy sales and a large electricity smart meter order.
But performance elsewhere was mixed. Automotive’s 7% profit increase was boosted by a R149m insurance settlement, while margins remain thin as the rapid rise of cheaper Chinese vehicles reshapes the business. Bidvest’s own Chinese-brand sales have trebled, but the changing sales mix is squeezing margins and eroding demand for used cars. Madisa says: “Consumers can now afford a cheaper new Chinese vehicle rather than a second-hand traditional [brand].” Bidvest’s historic ratio of about two used cars sold for every new car has consequently plunged to about one-to-one.
Bidvest Bank is another blemish. Its proposed R2.8bn sale to Nigeria’s Access Bank collapsed after the buyer failed to secure the required regulatory approvals before the agreed long-stop date, forcing Bidvest to restart the sale process.
The management distraction is one concern; the damage to the underlying franchise is more serious. Madisa tells the FM that the bank has effectively carried a “For Sale” sign for three years. “It’s very difficult to win new tenders because customers don’t know who the ultimate owner of the business is going to be,” she says. That uncertainty has put significant pressure on revenue and caused the underlying business to contract. Bidvest says potential buyers remain engaged and it is targeting completion of the disposal within the next 12 months.
After its year-end, Bidvest sold 13.25% of Adcock Ingram for R1.8bn, reducing its stake in the pharmaceuticals group from about 64% to 51%. Madisa says this does not signal a full exit and Bidvest intends to retain control for now. Rather, the partial sale replaced some of the deleveraging cash that had been expected from the delayed bank transaction.
The attraction of cash
Financial 2027 will be a year of restraint, with no material mergers & acquisitions (M&As) planned. “Cash generation remains king,” Madisa says, with leverage targeted at about 1.5–1.7 times and ROIC at 14%.
But the acquisition engine has not been shut down for good. CFO Mark Steyn says the deleveraging push is intended to restore balance sheet capacity to “recommence our normal M&A process” over time, even as the group funds a substantial five- to seven-year investment programme in Bidvest Freight.
Analysts are considerably more upbeat than the market. The seven analysts tracked by MarketScreener have an average target price of about R292, with estimates ranging from R276 to R308. PSG Wealth, which rated Bidvest a buy ahead of the results with an intrinsic value of R316, argues that a rerating depends on stronger cash conversion, deleveraging and proof that recent acquisitions can earn better returns. Two of those three conditions improved markedly in 2026, while ROIC remains the key unresolved issue.
At about 12 times earnings and a dividend yield of above 4%, Bidvest looks inexpensive for the quality of its assets. Scale across more than 250 businesses brings purchasing and distribution advantages, while many service operations are embedded in customers’ day-to-day activities, creating switching costs. Bidvest also holds leading positions in fragmented markets, including hygiene, freight and other essential services. That makes it look more like an undervalued business in transition than a value trap.
