ZEDER INVESTMENTS LIMITED - Acquisition by a subsidiary of Zeder of 100% of the issued share capital of Mpongwe Milling (2009) Limited

Acquisition by a subsidiary of Zeder of 100% of the issued share capital of Mpongwe Milling (2009) Limited

Zeder Investments Limited
(Incorporated in the Republic of South Africa)
Registration number: 2006/019240/06
Share code: ZED
ISIN: ZAE000088431
(“Zeder”)

ACQUISITION BY A SUBSIDIARY OF ZEDER OF 100% OF THE
ISSUED SHARE CAPITAL OF MPONGWE MILLING (2009) LIMITED
(“MPONGWE MILLING”)

1.   THE ACQUISITION

     Shareholders are hereby advised that Zeder, acting
     through its subsidiary Chayton Africa (or its nominee)
     (“the Purchaser”), has entered into an agreement with
     the shareholders of Mpongwe Milling (“the Sellers”)
     in terms of which the Sellers will dispose of the
     entire issued share capital in Mpongwe Milling (“the
     Sale Shares”) to the Purchaser (“the Acquisition”).

2.   BACKGROUND INFORMATION

     Mpongwe Milling, which has been privately owned by a
     family since 2006, is a leading maize and wheat mill
     in the Copperbelt province of Zambia and has been
     operating as such for over a decade.

     Chayton Africa, through its Zambian subsidiaries,
     currently owns and operates several large scale
     commercial farming operations in the Copperbelt and
     Central provinces of Zambia.

3.   RATIONALE FOR THE ACQUISITION

     Chayton Africa’s strategy is to become a diversified
     agricultural company that owns and operates grain and
     other related agri and value chain businesses across
     Southern Africa.

     Mpongwe Milling complements Chayton Africa’s current
     operations and the Acquisition provides Chayton
     Africa with an opportunity to expand its product
     offering across the value chain.

4.   PURCHASE CONSIDERATION

     The cash consideration payable by the Purchaser to
     the Sellers for the purchase of the Sale Shares is
     USD27 500 000, with USD2 500 000 of such purchase
     consideration being subject to the achievement of
     predefined future performance criteria by Mpongwe
     Milling. Failing such achievement, the USD2 500 000
     portion of the purchase consideration shall be
     reduced or forfeited.

5.   CONDITION PRECEDENT

     The Acquisition is subject to the condition precedent
     that the approval of the relevant competition
     authorities is obtained on conditions acceptable to
     the Purchaser.

6.   OTHER SIGNIFICANT TERMS

     Warranties   and   indemnities  as    are normal in
     transactions of this nature have been provided by
     each of the Sellers to the Purchaser.

7.   PRO FORMA FINANCIAL EFFECTS

     The pro forma financial effects of the Acquisition
     are presented for illustrative purposes only and
     because of their nature may not give a fair
     reflection of Zeder’s financial position nor of the
     effect on future earnings after the Acquisition.

     Set out below are the unaudited pro forma financial
     effects of the Acquisition, based on the unaudited
     interim results for the period ended 31 August 2013.
     The directors of Zeder are responsible for the
     preparation of the unaudited pro forma financial
     information.

                         Unaudited     Unaudited    Change (%)
                           before      Pro Forma
                        Acquisition      after
                          (cents)     Acquisition
                                        (cents)
     Recurring              9.2           9.3          1.1%
     headline
     earnings per
     share (basic and
     diluted)

     Headline               7.4           7.4           -
     earnings per
     share (basic and
     diluted)

     Attributable          10.6          10.6           -
     earnings per
     share (basic and
     diluted)

     Net asset value       347.8         347.8           -
     per share

     Net tangible          322.7         307.3        (4.8%)
     asset value per
     share

     Number of shares      980.2         980.2           -
     in issue
     (million)

     Weighted average      979.3         979.3           -
     number of shares
     in issue
     (million)

Notes and assumptions:

The unaudited interim information for the period
ended 31 August 2013 has been extracted from the
published interim results announcement of Zeder.

All the adjustments for the Acquisition will have a
continuing effect, except for the transaction costs
(refer note 8).

1.   The   recurring   headline   earnings   per   share,
     headline earnings per share and attributable
     earnings per share figures in the “Unaudited Pro
     Forma   after   Acquisition”    column   have   been
     calculated on the basis that the Acquisition was
     effected on 1 March 2013. The pro-forma financial
     effects on the aforementioned include:
     a. Zeder’s share of Mpongwe Milling's recurring
         headline earnings, headline earnings and
         attributable earnings for the six months
         ended 30 June 2013 in accordance with lag-
         accounting     principles    under    IFRS    10
         Consolidated Financial Statements;
     b. Finance costs incurred, at a rate of 3.5%, on
         Mauritian-based borrowings obtained in order
         to settle the purchase consideration; and
     c. Depreciation     on   Mpongwe   Milling's   fixed
         assets, which are revalued as part of the
         business combination.
2.   The net asset value per share and net tangible
     asset value per share figures in the “Unaudited
     Pro Forma after Acquisition” column have been
     calculated on the basis that the Acquisition was
     effected on 31 August 2013.
3.   Intangible assets of R151.1 million were acquired
     as part of the Acquisition.
4.   The taxation rate applicable is the Zambian
     corporate tax rate of 35%.
     5.   Exchange rates applied were:
          a. Average rates of R1.73/ZMW and R9.20/USD for
              the six months ended 30 June 2013; and
          b. Closing rates of R1.85/ZMW and R10.23/USD as
              at 6 November 2013.
     6.   The   recurring  headline   earnings  per  share,
          headline earnings per share and attributable
          earnings per share figures have been calculated
          using a weighted average number of shares in
          issue of 979.3 million for the period ended 31
          August 2013.
     7.   The net asset value per share and tangible net
          asset value per share calculations have been
          based on 980.2 million shares in issue as at 31
          August 2013.
     8.   Transaction costs of R2 million relating to the
          Acquisition are expensed.

8.   EFFECTIVE DATE OF THE ACQUISITION

     In terms of the agreement the effective date of the
     Acquisition will be the date on which the condition
     precedent has been fulfilled, which is estimated to
     be on or about 1 January 2014.

9.   CLASSIFICATION OF THE TRANSACTION

     The Acquisition is classified as a Category 2
     transaction in terms of the Listings Requirements of
     the JSE Limited (“Listings Requirements”).

10. SUBSIDIARY COMPANY

     As a result of the Acquisition, Mpongwe Milling will
     become a subsidiary company of Zeder and Zeder shall
     endeavour to ensure that the Zambian memorandum and
     articles of association of Mpongwe Milling (“MOI”)
     will not frustrate Zeder in any way from compliance
     with its obligation in terms of the Listings
     Requirements and nothing contained in the MOI shall
     relieve Zeder from compliance with the Listings
     Requirements.


Stellenbosch
13 November 2013

Sponsor and Corporate Advisor
PSG Capital

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