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AFR - AFGRI Limited - Announcement relating to the disposal by GroCapital Financial Services Proprietary Limited of its farmer lending book to the Land and Agricultural Development Bank of South Africa AFGRI Limited (Incorporated in the Republic of South Africa) Registration Number: 1995/004030/06 ISIN: ZAE000040549 JSE share code: AFR ("AFGRI" or "the Company") THE DISPOSAL BY GROCAPITAL FINANCIAL SERVICES PROPRIETARY LIMITED ("GROCAP") OF ITS FARMER LENDING BOOK TO THE LAND AND AGRICULTURAL DEVELOPMENT BANK OF SOUTH AFRICA ("LAND BANK") AFGRI Operations Limited, a wholly-owned subsidiary of the Company ("AFGRI Operations"), and GROCAP (a wholly-owned subsidiary of AFGRI Operations) have entered into a binding term sheet ("the Agreement") with the Land Bank in terms of which GROCAP will, upon fulfilment of the suspensive conditions referred to in paragraph 2 below, dispose of its existing and future farmer lending book to the Land Bank ("the Transaction"). 1 THE TRANSACTION 1.1 Rationale 1.1.1 The Transaction will improve AFGRI`s financial position and gearing , increase its access to funding and allow AFGRI to pursue other profitable opportunities with the capital that is released from the sale of the farmer lending book;
1.1.2 AFGRI and GROCAP have strong and established relationships with farmer clients that they want to retain and grow, and wish to continue offering financial services, at the current standard of service, to new and existing farmer clients alongside their other
products and service offerings; and 1.1.3 GROCAP has the capacity and infrastructure to act as an agent of the Land Bank in respect of the administration functions relating to the farmer lending book.
1.2 Terms of the Transaction In terms of the Transaction: 1.2.1 GROCAP will sell its existing farmer lending book to the Land Bank; 1.2.2 GROCAP will continue to originate farming debt in its own name but will, from time to time, offer to sell to the Land Bank such farming debt as meets Land Bank`s eligibility criteria; and 1.2.3 GROCAP will administer the farmer lending book on behalf of the Land Bank. 1.3 Purchase price 1.3.1 The purchase price of the farmer lending book shall be the face value of the farmer lending book as at the effective date, being the agreed date of acquisition specified in the definitive agreements referred to in 2.1, net of audited impairments as calculated in accordance with IAS 39. A more detailed announcement regarding the purchase price shall be made once the definitive legal agreements referred to in 2.1 have been entered into. 1.3.2. The purchase price will be utilised by GROCAP to settle the existing debt facilities in respect of the farmer lending book. 1.4 Pro forma financial effects of the Transaction A more detailed announcement regarding the pro forma financial effects of the Transaction on AFGRI shall be made once the definitive legal agreements referred to in 2.1 have been entered into. 2 SUSPENSIVE CONDITIONS The Transaction is subject to the fulfilment, or waiver of, inter alia, the following conditions: 2.1 The entering into of a Sale and Purchase Agreement and a Service Level Agreement between GROCAP, AFGRI Operations and the Land Bank ("the Parties") and such agreements becoming unconditional according to their terms; 2.2 the shareholders of GROCAP 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; 2.3 the unconditional approval of the Transaction by the South African Competition Authorities, or if such approval is conditional, subject to conditions acceptable to the Parties; 2.4 the Land Bank confirming its approval of the results of the financial and legal due diligence conducted by the Land Bank in respect of the farmers lending book; 2.5 AFGRI receives opinions from qualified advisors that the transaction will not lead to the consolidation of the sold farmer lending book in AFGRI`s financial statements in terms of IFRS; and 2.6 the respective boards of the Parties approving the Transaction. 3 RENEWAL OF CAUTIONARY Further to the cautionary announcements released by the Company on 4 July 2011 and 17 August 2011, as the Transaction may have a material effect on the price of AFGRI`s shares, AFGRI shareholders are advised to continue to exercise caution when dealing in their AFGRI shares. A further detailed announcement will be made once the definitive transaction agreements referred to in 2.1 have been concluded. Centurion 14 September 2011 Attorneys for the Company and the Purchaser Brink Cohen Le Roux Attorneys for GROCAP Van der Merwe Attorneys Attorneys for the Land Bank Edward Nathan Sonnenbergs Inc Advisors to the Land Bank Nedbank Capital Sponsor of the Company Investec Bank Limited Date: Supplied by www.sharenet.co.za Produced by the JSE SENS Department. Date: 14/09/2011 08:35:28 Supplied by www.sharenet.co.za Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on, information disseminated through SENS.
