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SKJ - Sekunjalo Investments Limited - Sekunjalo concludes investment in
Pioneer Foods Phase Ii Broad-Based Black Economic Empowerment Transaction
Sekunjalo Investments Limited
(Incorporated in the Republic of South Africa)
(Registration number 1996/006093/06)
Share code: SKJ
ISIN: ZAE000017893
("Sekunjalo" or "the Company")
SEKUNJALO CONCLUDES INVESTMENT IN PIONEER FOODS PHASE II BROAD-BASED BLACK
ECONOMIC EMPOWERMENT TRANSACTION
1. INTRODUCTION
1.1 Sekunjalo is pleased to advise shareholders of its inclusion as a
strategic Broad-based Black Economic Empowerment ("B-BBEE") partner in
the second phase of Pioneer Food Group ("Pioneer Foods") B-BBEE
strategy to introduce direct black ownership to Pioneer Foods
("Pioneer Foods Phase II B-BBEE Transaction"). The Pioneer Foods Phase
II B-BBEE Transaction is structured to be broad-based, including an
Education and Community Trust, black members of the board of the
Company and strategic B-BBEE partners, which includes Sekunjalo ("the
Transaction").
1.2 The Transaction is subject to the fulfilment, inter alia, of the
conditions precedent set out in paragraph 7 below, to facilitate a
subscription for shares in the issued share capital of Pioneer Foods
by black participants ("the Pioneer Foods Proposed Phase II B-BBEE
Specific Issue"). The Pioneer Foods Proposed Phase II B-BBEE Specific
Issue will involve the issue of shares equivalent to 13.55% of Pioneer
Foods` ordinary issued share capital post-implementation of the
Pioneer Foods Proposed Phase II B-BBEE Specific Issue ("enlarged
issued share capital") to all the black participants.
2. THE PIONEER FOODS PROPOSED PHASE II B-BBEE SPECIFIC ISSUE
2.1 The Pioneer Foods Proposed Phase II B-BBEE Specific Issue is based on
a 30 day volume weighted average share price ("VWAP") of R60.10 per
Pioneer Foods ordinary share ("Ordinary Share") as at the close of
trading on Friday, 02 December 2011 ("indicative market price"). The
effective market price for the Transaction will be determined based on
the 30 day VWAP price of Pioneer Foods Ordinary Shares on a future
date ("effective market price"). The specific issue by Pioneer Foods
to Sekunjalo will be made at a 5% discount to the effective market
price (The Specific Issue").
2.2 In terms of the Pioneer Foods Proposed Phase II B-BBEE Specific Issue,
Sekunjalo will hold, through a ring-fenced SPV ("the Sekunjalo SPV")
1,589,998 Pioneer Foods Ordinary Shares, being 0.75% of Pioneer Foods`
enlarged issued share capital. The approximate total combined
subscription price payable by Sekunjalo in terms of the Specific Issue
will amount to approximately R90,8 million based on the indicative
market price. The Specific Issue to Sekunjalo takes place at a
discount of 5%, effectively a discount of R4.8 million.
3. RATIONALE FOR THE TRANSACTION
Sekunjalo is firmly established as the pre-eminent black empowerment
group and is continuously looking for strategic opportunities. This
relationship with Pioneer Foods is in line with the company`s strategy
to become a partner of choice. Sekunjalo is in the food business
through Premier Fishing SA (Pty) Ltd and this transaction compliments
our portfolio in the food sector. We believe that the food sector will
have significant growth over the medium to long term in South Africa
and the rest of Africa. This further enhances our strategic thinking
around building a diversified investment holding company.
4. BUSINESS OF PIONEER FOODS
4.1 Operating in the food and beverages business sectors, Pioneer Foods`
core business is the production and distribution of a diverse range of
food, beverages and related products. Focused on products for both
human and animal consumption, Pioneer Foods is a significant player in
these industries in southern Africa.
4.2 Employing more than 11 000 permanent employees, the Group has a
leadership position in the staple foods segment with value-added
quality products, and a diversified and expanding portfolio of premium
household brands, across all market segments of the LSM categories.
4.3 The business operates through its four main divisions:
4.3.1 Sasko manufactures a range of affordable grain-based staple
foods. In addition to wheaten and maize products, it also trades
in rice, beans, lentils and dried vegetables and has one of South
Africa`s largest bakery operations with bakeries and depots
located throughout the country;
4.3.2 Bokomo Foods produce some of South Africa`s best-known breakfast
cereals, rusks, biscuits, cake mixes, baking aids, instant mash
potato, as well as dried fruit products, nuts, spreads,
dehydrated vegetables and processed salads;
4.3.3 The Agri business produces poultry and animal feeds, chickens,
eggs, processed egg and processed chicken-based products; and
4.3.4 The Ceres Beverage Company is one of the largest producers of
fruit juices, carbonated soft drinks (including Pepsi, 7-Up,
Mirinda and Mountain Dew) and fruit concentrate mixtures.
4.4 Within the Group there are a number of international joint ventures,
the most notable of which is a 49.9% stake in Heinz Foods SA. The
joint venture is between Pioneer Foods and HJ Heinz Company of the USA
and operates in the condiments and convenient food markets` producing
tomato sauces and ketchup, frozen foods, seafood tinned products,
tinned food, instant meals and noodles. Bowman Ingredients South
Africa is a 50% joint venture with Jas Bowman & Son in the UK`
supplying food ingredients to South Africa`s large food producers.
4.5 Pioneer Foods is committed to and accountable for ethical conduct
anchored in the core values of the Group and strongly subscribes to
the principles of good corporate governance. The group strives to be
an employer of choice and is committed to attraction, motivation,
development and retention of talent.
5. DETAILS OF THE PIONEER FOODS PROPOSED PHASE II B-BBEE SPECIFIC ISSUE
5.1 The Pioneer Foods Proposed Phase II B-BBEE Specific Issue will be
implemented through a specific issue of Ordinary Shares for cash by
Pioneer Foods.
5.2 The Specific Issue will be issued by Pioneer Foods in terms of Pioneer
Foods` articles of association (now referred to as the memorandum of
incorporation in terms of the Companies Act 71 of 2008, as amended
("MOI")) and on the terms and conditions and with the rights and
consideration debentures issued to Redefine in part discharge of the purchase
price pertaining to the owned properties businesses and related owned properties
be distributed by way of the partial repayment of capital to Redefine linked
unitholders. Accordingly it is intended that:
- in terms of section 46 of the Companies Act the Arrowhead consideration
shares be unbundled to Redefine linked unitholders in terms of section 46
of the Income Tax Act; and
- the Arrowhead consideration debentures be distributed to Redefine linked
unitholders as a partial repayment of capital in terms of paragraph 19.4 of
the Redefine debenture trust deed,
immediately whereafter the Arrowhead consideration shares will be indivisibly
linked to the Arrowhead consideration debentures as Arrowhead A linked units and
Arrowhead B linked units.
In compliance with the JSE timetable pertaining to unbundlings, the Arrowhead
consideration shares and the Arrowhead consideration debentures shall be listed
on the "Real Estate Holdings & Development" sector of the main board of the JSE
as Arrowhead linked units not less than 5 trading days prior to the unbundling
date.
NATURE OF BUSINESS
Arrowhead is a property loan stock company holding a diverse portfolio of
properties throughout South Africa. Its main focus will be on paying growing
income returns to its investors. This will be achieved through escalating
rentals in terms of leases with tenants, satisfactory renewal of leases with
existing tenants, letting of vacant space within the portfolios, managing and
reducing, where possible, costs associated with the portfolios and by acquiring
revenue enhancing properties.
Secondary grade properties brings with it additional business risk and this is
to be managed by having a growing portfolio, as diversified as possible in terms
of number of properties, a spread of tenants, of which, over time, will be rated
as A grade, a spread of locations throughout South Africa and a spread of
properties over the retail, office and industrial sectors of the property
market. It will also be the intention to fix interest rates on the majority of
Arrowhead`s debt to reduce exposure to interest rate risk. Active investor
relations as well as best practice corporate governance will also be a feature
of Arrowhead.
Arrowhead is to be managed internally with the day to day property management
being carried out by JHI.
LINKED UNITS
Two classes of linked units will be issued by Arrowhead:
- A linked units (comprising ordinary shares linked to A debentures), the A
debenture portion of which, in respect of each 3 month income period, shall
be paid an interest payment of 15 cents per A debenture or 50% of the
distributable earnings (divided by the number of A linked units in issue as
at the relevant record date) in respect of that 3 month period, whichever
is the greater, as interest;
- B linked units (comprising ordinary shares linked to B debentures), the B
debenture portion of which, in respect of each 3 month period, shall be
paid the balance of the distributable earnings (divided by the number of B
linked units in issue as at the relevant record date) in respect of that 3
month period, as interest.
Distributions will be payable quarterly. The A linked units will cater for risk
averse investors and the B linked units for those investors with an appetite for
risk. Being able to acquire both A and B linked units enables investors to vary
their level of risk.
The Arrowhead debenture trust deed provides that with effect from the day
immediately after the record date in respect of the fourth consecutive income
period where the interest payment in respect of each A debenture (included in an
A linked unit) is equal to or greater than 30 cents per A debenture (the day
immediately after the record date in respect of the last such income period
being referred to as "the conversion date" and the occurrence of such fact being
referred to as the "conversion event") every B debenture (linked to an ordinary
share as part of a B linked unit) shall automatically convert into 1 A debenture
(linked to an ordinary share as part of an A linked unit), as set out herein,
and (given that there will only be one class of debentures) the preferential
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