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AFR - AFGRI Limited - Announcement relating to the disposal by GroCapital
Financial Services Proprietary Limited and withdrawal of cautionary
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") AND WITHDRAWAL OF CAUTIONARY
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 Sale Agreement ("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"),as announced on Sens on 14 September 2011. The
Competition Tribunal approved the Transaction without any conditions on 19
October 2011.
1 THE TRANSACTION
1.1 Rationale
1.1.1 The Transaction will improve AFGRI`s financial position and gearing
levels , increase its access to funding and allow AFGRI to pursue more
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 ,which relationships AFGRI and the GROCAP 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 manage, administer and service 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 is 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.
1.3.2 The face value of the farmer lending book fluctuates according to the
utilisation of the farmer lending book facilities. The utilisation
usually peaks in February of each year in accordance with the planting
season of the crops. The total aggregate amount of the available
farmer lending book facilities is approximately R 2.4 billion . As at
30 June 2011 the utilised portion of the farmer lending book
facilities was approximately R1.886 billion. The farmer lending book
will be sold in various tranches. The purchase price of the first
tranche of the farmer lending book is approximately R 1.4 billion.
1.3.3. 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
For purposes of calculating the pro forma financial effects of the Transaction,
the pro forma Balance Sheet impact of the Transaction is based on the assumption
that the Transaction was effective on 30 June 2011, while the pro forma Income
Statement impact is based on the assumption that the Transaction was effective
on 1 July 2010.
These unaudited pro forma financial effects, which are the responsibility of the
Directors, have been prepared for illustrative purposes only and because of
their nature may not fairly present AFGRI`s financial position.
The pro forma financial effects of the Transaction on AFGRI`s earnings per
share, headline earnings per share, net asset value per share and net tangible
asset value per share for the financial year ended 30 June 2011 are not
significant (i.e. are less than 3%), and have therefore not been disclosed.
The impact on the Leverage ratio(1) for the financial year ended 30 June 2011 is
as follows:
Before(2) Pro-forma adjustments Pro-forma After Change
5.81 (2.31) 3.50 40%
The Debt to Equity ratio improves from 2.88 to 1.69.
(1)Leverage ratio is calculated as Net debt divided by Earnings Before Interest,
Tax, Depreciation and Amortisation.
(2)Extracted from the published consolidated financial results of AFGRI for the
twelve months ended 30 June 2011 as released on SENS on 7 September 2011 and
published in the South African press on 8 September 2011.
Pro forma adjustments reflect a decrease in net debt of R 1,886 billion (from
R4, 686 billion to R2.8 billion) from the settlement of debtors funding
facilities utilising the proceeds from the sale.
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 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 shareholder of GROCAP being AFGRI Operations, 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 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;
2.4 the respective boards of the Parties approving the Transaction; and
2.5 the consent of the National Treasury, to the extent necessary, to the Land
Bank entering into the Transaction.
3 WITHDRAWAL OF CAUTIONARY
Further to the cautionary announcements released by the Company on 4 July 2011,
17 August 2011 and 14 September 2011, these cautionary announcements are hereby
withdrawn. Shareholders are accordingly advised that they are no longer required
to exercise caution when trading in AFGRI shares.
Centurion
24 October 2011
Attorneys for the Company and AFGRI Operations
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: 24/10/2011 08:30:06 Supplied by www.sharenet.co.za
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