TIDMZAM
RNS Number : 0044Q
Zambeef Products PLC
06 September 2017
6 September 2017
Zambeef Products plc
("Zambeef" or the "Group")
Disposal of 90 per cent. shareholding in Zampalm Limited
Zambeef (AIM: ZAM), the fully integrated cold chain food
processing and retailing group with operations in Zambia, Nigeria
and Ghana, announces that it has entered into a Share Sale
Agreement, a Shareholders' Agreement and a Management Agreement
(together, the "Agreements") with the Industrial Development
Corporation of Zambia Limited ("IDC") for the sale of 90 per cent.
of Zambeef's shareholding in its wholly owned subsidiary, Zampalm
Limited ("Zampalm") to IDC for a cash consideration of USD16
million (the "Consideration") (the "Transaction"). For more
information on IDC, please see the notes section.
Transaction Overview
-- Disposal of 90 per cent. of Zambeef's shareholding in Zampalm
(after loan capitalisation, as referred to below) to IDC for a
total cash Consideration of USD16 million.
-- USD16 million cash to be paid on completion, with a further
Performance Amount of up to USD2 million dependent on performance
milestones over the three years from 2018 to 2020.
-- Disposal is aligned with the Group's strategy of focusing on
its core business of the production and retailing of cold chain
meat and dairy products, cropping and stockfeed.
-- Proceeds will be used to further pay down the Group's debt
and thus reduce gearing and interest costs.
Background
Zampalm was incorporated in 2009 following Zambeef's acquisition
of Zamanita Limited ("Zamanita") in order to develop an oil palm
plantation and crushing mill in Zambia as a continuation of its
strategy of vertical integration.
In addition to its position as a leading edible oil and soybean
meal producer, Zamanita also owned the only solvent extraction
plant in Zambia.
It is estimated that 50%-70% of Zambia's edible oil consumption
of approximately 120,000 M.T. per annum is imported as finished
edible oil from the Far East, East Africa and South Africa. Zampalm
was created to substitute those exports and produce palm oil
entirely in Zambia for the domestic market.
Zampalm owns 20,238 Ha of land on title in the Northern Province
of Zambia, on the Eastern side of Lake Bangweulu, to the North-West
of Mpika town. Zampalm currently has approximately 413,362 palms
planted over an area of 2,911 Ha in the main plantation, with
another 172,000 seedlings in the main and pre-nursery. The first
crushing mill (2 tons/hr) was established in 2016.
As at 30 September 2016:
1) The assets of Zampalm had a book value of ZMW189.8 million
(c.USD19 million), representing approximately 6.3 per cent. of the
Group's gross assets;
2) The revenue attributable to Zampalm was ZMW135,000
(c.USD12,465), accounting for 0.006 per cent. of the Group's
turnover; and
3) Zampalm recorded a loss after tax of ZMW1.6 million (c.USD0.15 million).
Rationale
In 2015, Zambeef disposed its entire 100 per cent. shareholding
in Zamanita to Cargill Holdings BV. The rationale for the Zamanita
disposal was as follows:
-- The Zambeef Board wished to re-focus its strategy on its key
business areas of retailing of cold chain meat and dairy products,
cropping and stock feed, and therefore resolved to dispose of
assets and businesses that were non-core;
-- From 2009 to 2015, the oil seed crushing industry had matured
and a number of new participants had entered the market, thus
making this sector highly competitive. As a result, the board of
directors of Zambeef (the "Board") felt that that it was no longer
essential for Zambeef to be involved in this industry, as the
primary production of crude palm oil was not core to the Group, and
there were enough other market players who now supplied
high-quality soybean meal at a competitive price. Furthermore, oil
seed crushing is a highly specialised and capital intensive
business which is also exposed to fluctuations in foreign exchange
rates and commodity prices.
Following the disposal of Zamanita, the Board has reviewed its
strategy for Zampalm and concluded that given the long timescales
required to create value from a greenfield project, it was in the
best interests of Zampalm stakeholders to seek a new majority
shareholder. IDC represent the ideal partner given its mandate of
working with the private sector to deliver long term economic
transformation.
Transaction Details
1) Disposal of Zambeef's 90 per cent. shareholding in Zampalm
(after loan capitalisation as referred to below) to IDC for USD16
million.
2) Zambeef will retain a 10 per cent. shareholding.
3) USD16 million cash Consideration paid on completion.
4) Further Performance Amount of USD2 million paid over 3 Performance Periods, as follows:
a) First Performance Period (1 October 2017 - 30 September 2018)
- First Performance Amount of USD666,667 to be paid on or before 31
December 2018;
b) Second Performance Period (1 October 2018 - 30 September
2019) - Second Performance Amount of USD666,667 to be paid on or
before 31 December 2019; and
c) Third Performance Period (1 October 2019 - 30 September 2020)
- Third Performance Amount of USD666,667 to be paid on or before 31
December 2020.
5) Payment of the Performance Amounts above shall be contingent
upon Zampalm achieving not less than 80 per cent. of the specified
projected Fresh Fruit Bunch ("FFB") yields and Crude Palm Oil (CPO)
production in any given Performance Period.
6) In the event that Zampalm fails to meet the projected FFB
yields and CPO production in any given Performance Period, Zambeef
shall not be entitled to claim the Performance Amount for the
applicable Performance Period.
7) Zambeef currently has in place two shareholder loans to
Zampalm totaling ZMW128.7 million (c.USD14.3 million) as at 1 June
2017, which will be affected as follows by the Transaction:
a) First Inter-Company Loan of ZMW106.4 million (c.USD11.8
million) as at 30 September 2016, which will be capitalised by
Zambeef into new ordinary shares of Zampalm prior to
Completion;
b) Second Inter-Company Loan - Zambeef's continuing shareholder
loan from 1 October 2016 to Completion date, which stood at ZMW22.4
million (c.USD2.5 million) as at 1 June 2017. This Second
Inter-Company Loan shall be applied towards Zambeef's shareholder
contributions for the three financial years 2018 to 2020 and
Zambeef shall not be obliged to make any further contributions to
Zampalm beyond the value of the Second Inter-Company Loan.
8) Each party commits to paying its share of the projected net
cash outflow over the next three years (2018 to 2020) before the
project is expected to become profit generating. Each party shall
pay its contribution annually in advance on or before 30 September
of each financial year.
Conditions Precedent
Completion is subject to certain conditions precedent to be
satisfied within 180 calendar days following signing of the
Agreements (the "Conditions Precedent"), including:
1) That the Zambia Competition and Consumer Protection
Commission (CCPC) provides either negative clearance or its
approval to the transaction, or if conditional approval is
obtained, that the parties accept such conditions in writing within
14 business days of receipt of the CCPC's notification;
2) That AIM, the Lusaka Stock Exchange and the Securities and
Exchange Commission are notified of the transaction, insofar as may
be required in terms of the Rules and the Securities Act and the
requisite approvals have been obtained;
3) Zambeef having capitalised the First Inter-Company Loan by
the creation of new ordinary shares in Zampalm that shall be
allotted and issued to Zambeef prior to Completion;
4) To the extent necessary, Zambeef having obtained the consent
of its lenders to effect the Transaction, including the discharge
of any encumbrances on the property and assets of Zampalm;
5) Zambeef having transferred the "Zampalm Limited" trademark to IDC.
Effective Date
The effective date for the Transaction shall be the date of the
fulfilment of the Conditions Precedent.
Application of the Proceeds
This Transaction will allow Zambeef to unlock value, via a
reduction in overall gearing, and in so doing reduce interest
costs.
Categorisation of the Transaction on the Lusaka Stock
Exchange
The Transaction is classified as a Category 2 transaction in
terms of Section 9 of the Lusaka Stock Exchange Listings
Requirements. Accordingly, it is not subject to approval by Zambeef
shareholders.
Dr. Jacob Mwanza, Chairman of Zambeef, commented:
"This transaction is in line with and a continuation of the
Group's strategic vision, which will allow Zambeef to focus on
growing its core business, which is the production and retailing of
cold chain meat and dairy products, cropping and stockfeed,
delivered through the Group's extensive processing, distribution
and retail network. Furthermore, the transaction will allow Zambeef
to continue to reduce its overall gearing, and in so doing, reduce
interest costs."
For further information, please contact:
Zambeef Products plc Tel: +260 (0)
211 369003
Carl Irwin, Joint Chief Executive Officer
Francis Grogan, Joint Chief Executive Officer
Strand Hanson Limited Tel: +44 (0)
20 7409 3494
James Spinney
Ritchie Balmer
Frederick Twist
finnCap Tel: +44 (0)
20 7220 0500
Emily Morris
Christopher Raggett
Powerscourt Tel: +44 (0)20
7250 1446
Nick Dibden
Nick Brown
Notes to editors
Information on Zambeef
The Zambeef Group is one of the largest integrated cold chain
food producers in Zambia, involved in the production, processing,
distribution and retailing of beef, chicken, pork, milk, eggs,
dairy products, fish, flour and stock feed. The Group also has
large cereal row cropping operations (principally maize, soya beans
and wheat), with approximately 7,971 hectares of row crops under
irrigation, which are planted twice a year and a further 8,623
hectares of rain-fed/dry-land crops available for planting each
year.
Further information can be found on www.zambeefplc.com
Information on IDC
The Industrial Development Corporation of Zambia Limited is an
investment company wholly owned by the Zambian government,
incorporated in early 2014 as a company limited by shares under the
Companies Act of Zambia.
IDC's mandate is to play a catalytic role in deepening and
supporting Zambia's industrialisation capacity to promote job
creation and domestic wealth formation. The IDC is an active
shareholder and investor focused on a broad spectrum of
sectors.
IDC serves as an investment holding company for Zambia's
State-Owned Enterprises (SOEs) and new investments that ultimately
generate earnings for the proposed Zambia Sovereign Wealth Fund.
The IDC plays its role through evaluation, pricing and lowering the
investment risk profile by serving as co-investor alongside private
sector investors. The IDC facilitates provision and raising of long
term finance for projects.
IDC operates as an independent commercial investment holding
company; it has its own board of directors and a professional
management team.
The information contained within this announcement is deemed by
the Company to constitute inside information as stipulated under
the Market Abuse Regulations (EU) No. 596/2014 ("MAR").
-Ends-
This information is provided by RNS
The company news service from the London Stock Exchange
END
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