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Withdrawal of cautionary announcement
COUNTRY BIRD HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Reg. No: 2005/008505/06)
Share Code: CBH
ISIN: ZAE000094835
Withdrawal of cautionary announcement
Shareholders of Country Bird Holdings Limited (“CBH Ltd”) are referred to the cautionary
announcement published on 22 February 2013 in respect of negotiations entered into with the
International Finance Corporation (“IFC”). As the financial effects were not disclosed in the
announcement on 22 February 2013, they are set out below.
The IFC will invest USD25 million in the form of a convertible loan (the “Proposed Transaction”). The
convertible loan will have a term of 5 years and will bear interest at a variable rate calculated with
reference to the 6 month Libor rate plus 3% per annum for an initial period of 2.5 years ("Initial
Period”). In the event that the loan is not converted to equity in the Initial Period, the loan becomes a
term loan bearing interest at 4.5% above the 6 month Libor rate, repayable in 5 approximately equal
semi-annual instalments starting after the end of the Initial Period. Interest is payable on 15 June
and 15 December each year.
The IFC will have an option to convert a portion or the whole of the principal amount of the
convertible loan into CBH Ltd ordinary shares in multiple tranches at any time during the Initial
Period at a strike price of R4.90 per share, provided a minimum conversion amount would be
USD5 million equivalent per tranche and further provided that IFC’s shareholding in CBH Ltd would
not exceed 18% in total.
The funding will be utilised to increase chick production in Zambia and Botswana, to expand the
feedmill capacity in Zambia, to increase broiler meat processing capacity and to construct soya bean
deactivation plants at two of its feedmills.
The Proposed Transaction will result in a long-term strategic relationship with the IFC and the
enduring benefits are expected to accrue to CBH Ltd over the medium to long-term.
The Proposed Transaction will be subject to the fulfilment of the following conditions:
1. The IFC board approval, following a public disclosure period of 30 days in terms of the IFC
Access to Information Policy;
2. CBH Ltd shareholder approval as required by the JSE Listing Requirements and the
Companies Act (71 of 2008); and
3. The IFC and CBH obtaining all other necessary regulatory and statutory approvals and
consents.
Financial effects of the Proposed Transaction
The table below sets out the unaudited pro forma financial effects of the Proposed Transaction on
the published unaudited results for CBH Ltd for the six months ended 31 December 2012.
The unaudited pro forma financial effects, which are the responsibility of the directors of CBH Ltd,
have been prepared for illustrative purposes only and because of their nature may not fairly present
CBH Ltd’s financial position, changes in equity, results of operations or cash flows, nor the effect and
impact of the Proposed Transaction going forward. The unaudited pro forma financial effects have
been compiled on a basis consistent with the accounting policies of CBH Ltd as at 31 December
2012.
For the six months ended Before1 After Change
31 December 2012 (cents) (cents) (%)
NAV2 272.13 272.13 -
TNAV2 219.33 219.33 -
Number of CBH Ltd
-
shares in issue (millions) 202.44 202.44
Notes and assumptions:
1. Extracted from the published unaudited group results of CBH for the six months ended 31 December 2012.
2. The effects on net asset value per share and net tangible asset value per share are based on the following
assumptions:
a. The Proposed Transaction was effective 31 December 2012.
b. A ZAR/USD exchange rate of USD1 = R8.869, being the prevailing exchange rate at 08h00 on Friday 22
February 2013.
c. On initial recognition, the convertible loan will be measured as the difference between the notional value of
the convertible loan, being USD25 million, and the fair value of the conversion option in terms of IFRS using a
Cox Ross Rubenstein binomial tree methodology. For purposes of the unaudited pro forma financial effects,
the convertible loan is recognised as a financial liability at an assumed fair value of R199.9 million (USD22.5
million converted at USD1 = R8.869) after capitalising transaction costs, namely a front end fee of 1%,
together with a derivative financial liability to account for the conversion option at an assumed fair value of
R19.6 million (USD2.2 million converted at USD1 = R8.869)..
d. The assumptions underlying the above fair value calculations are as follows:
i. The spot price of CBH Ltd shares of R3.50;
ii. Volatility of 41.51%;
iii. Dividend yield of 2.9%; and
iv. Inferred credit spread of 6.60% over LIBOR of 0.46% resulting in an effective interest rate of 7.06%.
On the initial recognition of the financial liability, derivative financial liability and the corresponding amount in
cash and cash equivalents, no gain or loss is recognised for purposes of the pro forma financial effects and
therefore there is no impact on NAV or TNAV.
3. No effect on earnings, diluted earnings, headline earnings and diluted headline earnings per share is illustrated
as:
a. The return on the investment in increasing production and capacity, as detailed above, is uncertain and
consequently not factually supportable. However, CBH is targeting a minimum average internal rate of return
on the investment projects of 20%.
b. The timing of the application of the proceeds of the Proposed Transaction is currently uncertain and the total
proceeds of USD25m less costs will initially be placed within existing short term debt facilities until drawn
down over a period of time for purposes of the proposed expansion capital expenditure. Consequently,
potential interest savings is uncertain and therefore not factually supportable.
4. The accounting effect of the Proposed Transaction on earnings, diluted earnings headline earnings and diluted
headline earnings per share is as follows:
a. The convertible loan will be initially recognised at fair value (refer above) and thereafter at amortised cost.
b. Exchange differences arising on translation of the convertible loan outstanding at each reporting date to the
closing exchange rate will be charged to income.
c. Finance costs on the convertible loan will be charged on an annual basis to income. Illustrative interest costs
to be charged to income for the first six month period, assuming an effective interest rate of 7.06% (before
tax), total R5.3 million (USD0.6 million converted at USD1 = R8.869) after tax.
d. The conversion option will be initially recognised at fair value (refer above) and re-measured at each reporting
date, with movements in fair value being recognised within income.
e. Exchange differences arising from translating the fair value of the conversion option to the closing rate will be
charged to income.
f. All the above accounting effects of the convertible loan and the conversion option remain within headline
earnings per share.
g. The conversion of the entire convertible loan would result in the issue of 45,250,000 new shares, equating to
a 22.35% increase in the current number of shares in issue. The full effect of this dilution will impact the
calculation of diluted earnings per share from the effective date.
In accordance with the World Bank Group requirements, a summary of the investment information
has been placed on the IFC website: www.ifc.org. Shareholders are also referred to CBH Ltd’s
website, www.cbh.co.za, for more information. The Proposed Transaction is subject to shareholder
approval and a circular including a notice of general meeting will be sent to shareholders in due
course.
Shareholders are referred to the cautionary announcement dated 22 February, and are advised that
as the pro forma financial effects in relation to the Proposed Transaction have been disclosed in this
announcement, caution is no longer required to be exercised by shareholders when dealing in their
securities.
Johannesburg
15 March 2013
Investment Bank and Sponsor: Investec Bank Limited
Date: 15/03/2013 02:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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