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AFR - AFGRI Limited - Acquisition of yellow maize business of Pride Milling
Company and withdrawal of cautionary
AFGRI Limited
Registration Number: 1995/004030/06
(Incorporated in the Republic of South Africa)
ISIN: ZAE000040549
JSE share code: AFR
("AFGRI" or "the Company")
ACQUISITION OF YELLOW MAIZE BUSINESS OF PRIDE MILLING COMPANY AND WITHDRAWAL
OF CAUTIONARY
1. INTRODUCTION
AFGRI Operations Limited, a wholly owned subsidiary of the Company ("the
Purchaser"), Pride Milling Company Proprietary Limited ("the Seller") and Gro
Capital Financial Services Proprietary Limited (a wholly-owned subsidiary of
the Purchaser) ("Gro Capital") have entered into a binding sale of business
agreement ("the Agreement") in terms of which the Purchaser will, upon
fulfilment of the suspensive conditions referred to in paragraph 3 below ("the
Conditions"), acquire the yellow grits and by-products milling business of the
Seller conducted at Ermelo, Kinross and Bethal as a going concern ("the
Transaction").
2. THE TRANSACTION
2.1 Rationale
As part of the Purchaser`s growth strategy, it identified the Business as
a valuable asset which falls within the Purchaser`s strategy to expand
its industrial processing capacity of its Foods segment.
2.2 Terms of the Transaction
In terms of the Transaction, the Seller will sell the Business as a going
concern to the Purchaser with effect from the effective date of the
Transaction, which will occur once the last of the Conditions has been
satisfied ("Effective Date").
2.3 Purchase price
2.3.1 In addition to the assumption of the sale liabilities of the Seller,
the purchase price payable by the Purchaser to the Seller in terms
of the Agreement is R220,000,000, subject to adjustment (if any) as
set out below in paragraphs 2.3.2 and 2.3.3 below ("the Purchase
Price").
2.3.2 After the Effective Date, the stock, debtors and trade creditors of
the Business will be valued and to the extent that the value of the
stock and debtors is more or less than the value of the trade
creditors, the Purchase Price will be adjusted upwards or downwards
by the amount of this difference. This upwards or downwards
adjustment will not be more than R5 million.
2.3.3 In addition to the payment of the Purchase Price, an amount equal to
R20,000,000 will be paid by the Purchaser to the Seller if the
Business achieves or exceeds an agreed aggregate earnings before
interest, tax, depreciation and amortisation target over the 24-
month period ending on 31 October 2013.
2.3.4 The Purchase Price will be paid from the Purchaser`s own cash
resources
2.4 Pro forma financial effects of the Transaction
2.4.1 Set out below are the unaudited pro forma financial effects on AFGRI
in respect of the implementation of the Transaction by the
Purchaser, based on the published unaudited consolidated interim
financial results of AFGRI for the six months ended 31 December
2010. The pro forma financial effects are the responsibility of the
board of directors and have been prepared for illustrative purposes
only. The pro forma effects may not give a fair reflection of a
shareholder`s financial position after the Transaction.
Unaudited Pro Forma Change%
Before After
(Cents) (Cents)
Basic earnings per share 44.4 47.3 +6.5%
Diluted earnings per share 40.9 43.6 +6.5%
Headline earnings per share 44.6 47.5 +6.5%
Diluted headline earnings per share 41.2 43.9 +6.4%
Net asset value per share 446 446 +0.0%
Tangible net asset value per share 388 340 -12.2%
Weighted number of ordinary shares in issue: 328,702,402
Diluted weighted number of ordinary shares in issue: 356,503,834
Notes: The pro forma income statement effects (basic earnings per share and
headline earnings per share) are based on the assumption that the Transaction
was effective on 1 July 2010. The pro forma balance sheet effects (net asset
value per share and tangible net asset value per share) are based on the
assumption that the Transaction was effective on 31 December 2010.
2.4.2 It is expected that the synergies derived from the Transaction
should have a beneficial impact on the AFGRI Group.
3. SUSPENSIVE CONDITIONS
The Transaction is subject to the fulfilment or waiver of, inter alia, the
following conditions:
3.1 the shareholders of the Seller approving the Transaction by way of a
special resolution in terms of section 112(2)(a) read with section
115(2)(a) of the Companies Act 71 of 2008, as amended;
3.2 the unconditional approval of the Transaction by the South African
Competition Authorities, or if such approval is conditional, subject to
conditions acceptable to the Purchaser insofar as such conditions affect
the Purchaser, and to the Seller insofar as such conditions affect the
Seller;
3.3 the Purchaser confirming its approval of the results of the financial,
legal and technical due diligence conducted by the Purchaser in respect
of the Business
3.4 the cancellation and release of any and all encumbrances registered
against or existing in respect of any of the sale assets on terms and
conditions acceptable to the Purchaser;
3.5 the entering into of employment agreements with certain key employees of
the Seller;
3.6 The shareholder of the Seller giving restraint of trade undertakings in
favour of the Purchaser;
3.7 the counterparties to identified key contracts of the Business consenting
to the cession and delegation of such key contracts to the Purchaser on
terms and conditions acceptable to the Purchaser;
4. CATEGORISATION
The Transaction is a Category 2 transaction for AFGRI in terms of section
9.5(a) of the JSE Listings Requirements and accordingly, approval of the
Transaction by shareholders of AFGRI is not required.
5. WITHDRAWAL OF CAUTIONARY
Further to the cautionary announcement released by the company on 30 May 2011,
shareholders are advised that such cautionary announcement is now withdrawn.
Shareholders are accordingly no longer required to exercise caution when
dealing in their AFGRI shares.
Centurion
15 June 2011
Attorneys for the Company and the Purchaser
Webber Wentzel Attorneys
Sponsor of the Company
Investec Bank Limited
Date: 15/06/2011 13:36:26 Supplied by www.sharenet.co.za
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