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AFGRI LIMITED - Firm intention by Agrigroupe to make a cash offer to acquire the entire issued ordinary share capital of Afgri

Release Date: 27/09/2013 17:00
Code(s): AFR     PDF:  
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Firm intention by Agrigroupe to make a cash offer to acquire the entire issued ordinary share capital of Afgri

 AgriGroupe Holdings Proprietary Limited             AFGRI Limited
 (Incorporated in the Republic of South Africa)      (Incorporated in the Republic of South Africa)
 (Registration number 2013/013161/07)                (Registration number 1995/004030/06)
 (“AgriGroupe”)                                      JSE Share Code: AFR ISIN: ZAE000040549
                                                     (“AFGRI”)




JOINT ANNOUNCEMENT OF THE FIRM INTENTION BY AGRIGROUPE TO MAKE A CASH
OFFER TO ACQUIRE THE ENTIRE ISSUED ORDINARY SHARE CAPITAL OF AFGRI


1.   INTRODUCTION


     Further to the updated cautionary announcement released on 6 September 2013
     (“Cautionary Announcement”), AFGRI shareholders are advised that on 27 September
     2013, AFGRI entered into an implementation agreement (“Implementation Agreement”) with
     AgriGroupe in terms of which AgriGroupe, inter alia, offered to acquire the entire issued
     ordinary share capital of AFGRI, excluding the AFGRI ordinary shares held by (i) AFGRI
     subsidiaries and (ii) the AFGRI employee share incentive trusts, (“Scheme Shares”)
     (“Proposed Transaction”).


     It is the intention of AgriGroupe to terminate the listing of AFGRI on the main board of the JSE
     Limited (“JSE”) should the Proposed Transaction be implemented.


2.   INFORMATION ABOUT AGRIGROUPE

     AgriGroupe is a private investment holding company duly incorporated in South Africa, which
     is owned by Joseph Investment Holdings (a private company duly incorporated in Mauritius).
     Certain members of AFGRI’s management (“AFGRI Management”) are expected to
     ultimately hold an interest of approximately 5% in AgriGroupe and are therefore acting in
     concert with AgriGroupe. AFGRI Management will accordingly abstain from voting on the
     required AFGRI shareholder resolutions at the Scheme Meeting (as defined in paragraph 6.6
     below).

     Negotiations are ongoing which may result in local shareholders, including a new Black
     Economic Empowerment (“BEE”) consortium and other parties acquiring an interest of up to
     35% in AgriGroupe. This BEE shareholding in AgriGroupe will provide additional BEE
     ownership in AFGRI’s business, incremental to the current 26.77% broad-based BEE
     ownership in AFGRI Operations Limited with Izitsalo Employee Investments Proprietary
     Limited (registration number 2004/024831/07) (“Izitsalo”) that was announced on 4 June
     2013. Following this proposed investment, AFGRI would be amongst the most empowered
     large companies in South Africa.
     AgriGroupe's management have expertise in acquisitions and investments in Africa, with a
     longstanding investment thesis in African agriculture. AgriGroupe's underlying investors
     include North American institutions, family offices and individuals with no links to foreign
     governments or competitors, and will include a consortium of South African BEE strategic
     investors with agricultural expertise, including broad-based BEE groups as outlined above.

3.   RATIONALE FOR THE OFFER


     3.1.   AgriGroupe has assured the AFGRI board of directors (“AFGRI Board”) that
            AgriGroupe intends to remain a long-term investor in AFGRI, to strengthen and seek
            growth opportunities for its South African operations and to support expansion on the
            African continent.


     3.2.   AgriGroupe believes food security is a major concern worldwide and that AFGRI has
            the necessary assets, skills and expertise in agriculture and grain management to
            make a substantial impact by increasing agricultural productivity and access to market
            for smallholding and large commercial farmers across South Africa and Africa.


     3.3.   AgriGroupe further believes AFGRI has the potential to build critical supply chain
            infrastructure and provide logistics solutions at scale in Africa, but that substantial
            capital investment will be required over the medium-term.


     3.4.   AgriGroupe further believes that the strategic growth opportunity for AFGRI lies in its
            ability to deploy its comprehensive grain management solutions and expertise in
            selective attractive markets on the African continent, as has already been
            demonstrated on a limited scale in Zambia and Congo Brazzaville. This will require a
            large and long-term commitment of capital expenditure and management resources,
            which AgriGroupe does not believe can be effectively accomplished through a public
            company with traditional institutional shareholders requiring shorter term results.

     3.5.   AgriGroupe supports AFGRI’s strategic vision for pan-African growth and will maintain
            management continuity as it offers a ‘friendly hands’ solution to safeguard AFGRI’s
            assets and business model over the long term for the benefit of Africa and its people.


     3.6.   AgriGroupe has a strong commitment to social development and ongoing
            transformation goals, including broad-based BEE, and supports the South African
            government’s objectives and policies towards transformation in the agricultural sector.

     3.7.   AgriGroupe believes that its offer represents substantial value to AFGRI shareholders.
            AgriGroupe's offer is fully-funded, is not subject to due diligence, and, as neither
            AgriGroupe nor its investors compete in any of the markets in which AFGRI operates,
            AgriGroupe believes its offer poses no substantive execution risk regarding competition
            issues or delays.


     3.8.   As such, AgriGroupe strongly believes its offer is in the best interests of AFGRI, its
            stakeholders (including over 7,000 farmers, 4,500 employees and millions of
            consumers currently served) and the long-term food security interests of South Africa
            and the African continent.

4.   MATERIAL TERMS OF THE PROPOSED TRANSACTION


     4.1.       Transaction mechanism

                4.1.1. AgriGroupe intends acquiring the Scheme Shares by way of a scheme of
                        arrangement in terms of section 114 of the South African Companies Act
                        71 of 2008, as amended, (“Companies Act”) (“Scheme”) to be proposed
                        by the AFGRI Board between AFGRI and the holders of Scheme Shares
                        (“Shareholders”).

                4.1.2. The Scheme will be implemented as follows:

                            4.1.2.1. The Scheme will be proposed by the AFGRI Board between
                                     AFGRI and the Shareholders.


                            4.1.2.2. The Scheme will be subject to the fulfilment of the suspensive
                                     conditions referred to in paragraphs 5 and 6 below.


                            4.1.2.3. The purchase price payable for the Scheme Shares, and the
                                     terms of payment, will be as is set out in paragraph 4.2 below.


                            4.1.2.4. In the event that the Scheme is successfully implemented,
                                     AFGRI will become a wholly owned subsidiary of AgriGroupe
                                     and its listing on the JSE will be terminated.


     4.2.       Purchase consideration


                4.2.1.In terms of the Scheme, AgriGroupe will pay to the Shareholders a cash
                      consideration of R7.00 per Scheme Share (“Scheme Consideration”),
                      which is exclusive of the 3.3 cent dividend due to Shareholders in November
                      2013.


                4.2.2.If the Scheme has not been implemented by 31 January 2014, the Scheme
                      Consideration shall accrue interest at the prime overdraft lending rate (as
                      published by FirstRand Bank Limited) from that date up to and including the
                      operative date of the Scheme.



The table below illustrates the Scheme Consideration premium:

                  Prior to the                     Prior to signing of
                  Cautionary                       the Implementation
                                     Premium                              Premium
               Announcement (6                       Agreement (27
                                        (%)                                  (%)
               September 2013)                     September 2013)
                      (R)                                 (R)
 Market
                     4.80 (1)         45.8%             5.55 (5)           26.1%
 price
 30-day
                     4.70 (2)         49.0%             4.85 (6)           44.3%
 VWAP
 60-day
                     4.45(3)          57.3%             4.59 (7)           52.5%
 VWAP
 90-day
                     4.48 (4)         56.3%             4.52 (8)           54.9%
 VWAP


Notes:
1.   Closing price of AFGRI shares on the JSE on 5 September 2013, being the
     last trading day prior to the publication of the Cautionary Announcement.
2.   VWAP at which AFGRI shares traded on the JSE for the 30 trading days up
     to and including 5 September 2013, being the last trading day prior to the
     publication of the Cautionary Announcement.
3.   VWAP at which AFGRI shares traded on the JSE for the 60 trading days up
     to and including 5 September 2013, being the last trading day prior to the
     publication of the Cautionary Announcement.
4.   VWAP at which AFGRI shares traded on the JSE for the 90 trading days up
     to and including 5 September 2013, being the last trading day prior to the
     publication of the Cautionary Announcement.
5.   Closing price of AFGRI shares on the JSE on 26 September 2013, being the
     last trading day prior to signing the Implementation Agreement.
6.   VWAP at which AFGRI shares traded on the JSE for the 30 trading days up
     to and including 26 September 2013, being the last trading day prior to
     signing the Implementation Agreement.
7.   VWAP at which AFGRI shares traded on the JSE for the 60 trading days up
     to and including 26 September 2013, being the last trading day prior to
     signing the Implementation Agreement.
                8.   VWAP at which AFGRI shares traded on the JSE for the 90 trading days up
                     to and including 26 September 2013, being the last trading day prior to
                     signing the Implementation Agreement.


5.   MATERIAL CONDITIONS TO THE POSTING OF THE CIRCULAR


     The posting of a circular to Shareholders in respect of the Scheme (“Circular”) is subject to
     the fulfilment or waiver of the following suspensive conditions:


     5.1.    the AFGRI Board having appointed Ernst and Young Advisory Services Proprietary
             Limited as the independent expert in terms of section 114(2) of the Companies Act
             and the regulations published in terms of section 120 of the Companies Act and set
             out in Chapter 5 of the Companies Regulations, 2011 (“Takeover Regulations”)
             (“Independent Expert”) and the Independent Expert having prepared and issued a
             report concerning the Scheme and the proposed investment by AFGRI Management
             in AgriGroupe detailed in paragraph 7 (“Reinvestment Option”) to the Shareholders
             in terms of section 114(3) of the Companies Act and Takeover Regulation 113;


     5.2.    the Independent Expert, in its report referred to in paragraph 5.1 above, expressing
             the opinion that the Scheme Consideration is fair and reasonable to the
             Shareholders;


     5.3.    the Takeover Regulation Panel established in terms of section 196 of the Companies
             Act ("Takeover Panel") granting an exemption in terms of section 119(6) of the
             Companies Act to AgriGroupe from having to make an offer to Izitsalo in terms of
             Takeover Regulation 85 as a result of AFGRI Operations Limited being a controlled
             company (as defined in Takeover Regulation 81(f)) in relation to AFGRI;


     5.4.    the independent board of AFGRI established for purposes of the Proposed
             Transaction (“Independent Board”) recommending to Shareholders that they vote in
             favour of the Scheme; and


     5.5.    all requisite approvals being received from the JSE, the Takeover Panel, and the
             Financial Surveillance Department of the South African Reserve Bank for the posting
             of the Circular.


6.   MATERIAL CONDITIONS TO THE SCHEME

     The Scheme will be subject to the fulfilment or waiver of the following suspensive conditions:
6.1.   the receipt by AFGRI of certain third party consents or waivers in respect of any
       change of control rights they may have pursuant to, or any events of default which
       may be triggered by, the Proposed Transaction;


6.2.   the receipt of the unconditional approval in writing of the South African competition
       authorities of the Proposed Transaction or, if such approval is conditional, such
       conditions being acceptable to AFGRI and AgriGroupe, acting reasonably;


6.3.   the receipt of the unconditional approval in writing of the Nigerian and Namibian
       competition authorities as well as, in respect of Zambia, Zimbabwe and Swaziland,
       the Zambian, Zimbabwean and Swazi competition authorities, respectively (unless
       the Common Market for Eastern and Southern Africa authority is approached for
       approval in respect of such jurisdictions) of the Proposed Transaction or, if any such
       approval is conditional, such conditions being acceptable to AFGRI and AgriGroupe,
       acting reasonably;


6.4.   the receipt of a compliance certificate in relation to the Proposed Transaction from the
       Takeover Panel;


6.5.   the approval from the JSE for the termination of the listing of AFGRI;


6.6.   the approval of the Scheme by the requisite majority of Shareholders at the general
       meeting convened to approve the Scheme (“Scheme Meeting”), as contemplated in
       section 115(2) Act, and (i) to the extent required, the approval of the implementation
       of the special resolution approving the Scheme by the Court; and (ii) if applicable,
       AFGRI not treating the special resolution approving the Scheme as a nullity, as
       contemplated in section 115(5)(b) of the Companies Act; and

6.7.   within 30 business days following the Scheme Meeting, Shareholders exercise
       appraisal rights, in terms of section 164 of the Companies Act, by giving valid
       demands in terms of section 164(7) of the Companies Act, in respect of no more than
       5% of the issued ordinary shares of AFGRI, provided that, in the event that
       Shareholders give notice objecting to the Scheme as contemplated in section 164(3)
       of the Companies Act and/or vote against the resolutions proposed at the Scheme
       Meeting in respect of no more than 5% of the issued ordinary shares of AFGRI, this
       condition shall be deemed to have been fulfilled at the time of the Scheme Meeting.
7.     AFGRI MANAGEMENT


       After the operative date of the Scheme the members of AFGRI Management will utilise at
       least 70% of the after-tax proceeds of the Scheme Consideration and the payments
       contemplated in paragraph 8 received by them to subscribe, through one or more vesting
       trusts, for shares in AgriGroupe. They will also be entitled to subscribe for additional shares
       in AgriGroupe, such that when aggregated with their existing shareholding in AgriGroupe,
       they will hold up to 5% of the issued shares in AgriGroupe.

8.     SHARE OPTION SCHEME


       AFGRI will procure that, subject to the Scheme becoming unconditional in all respects, option
       holders under the share option scheme operated by the AFGRI Limited Trust ("Share Option
       Scheme") will be entitled to receive a cash consideration equal to the difference between the
       Scheme Consideration and the purchase price payable by the relevant option holder in
       respect of each option held by them, as consideration for the option holders waiving the rights
       of their existing options on the date of the Scheme becoming operative.


9.     SHARE AWARD SCHEME


       AFGRI will procure that, subject to the Scheme becoming unconditional in all respects, the
       share awards of the participants of the AFGRI Group Executive Share Award Scheme vest
       early in order to allow such participants to participate in the Scheme.


10.    BREAK FEE


       The Implementation Agreement includes a break fee equal to 1% of the aggregate Scheme
       Consideration which would be payable by AFGRI if after the publication of this
       announcement:


      10.1.     the Independent Board does not recommend the Scheme or if it withdraws or
                modifies or qualifies its recommendation of the Scheme, save in the event that the
                fair and reasonable opinion of the Independent Expert does not reasonably justify or
                warrant such a recommendation or only justifies such a recommendation subject to
                such qualifications as may be identified in the fair and reasonable opinion;
      10.2.     AFGRI or the AFGRI Board approves or recommends and/or enters into an
                agreement to effect an alternative proposal;


      10.3.     the AFGRI Board or the Independent Board determines not to implement the
                Scheme by:
               10.3.1.1.   refusing to take the required steps to obtain approval of the Scheme by
                           the requisite majority of Shareholders as contemplated in section 115(2)
                           of the Companies Act;
               10.3.1.2.   refusing to take the required steps to obtain approval of the court to
                           implement the special resolution approving the Scheme in the
                           circumstances contemplated in section 115(3) of the Companies Act; or
               10.3.1.3.   treating the shareholder approval as a nullity, as contemplated in section
                           115(5)(b) of the Companies Act, unless requested to do so by
                           AgriGroupe.


11.   FUNDING OF THE PROPOSED TRANSACTION


      AgriGroupe will fund the full purchase consideration from its own cash resources, sufficient for
      the purposes of satisfying the Scheme Consideration. The Takeover Panel has been provided
      with a bank guarantee from Rand Merchant Bank (a division of FirstRand Bank Limited) in
      compliance with Takeover Regulation 111(4)(a) and 111(5).


12.   SHAREHOLDING OF AGRIGROUPE AND CONCERT PARTIES IN AFGRI


      12.1. As at the date of this announcement, AgriGroupe does not hold or control (directly or
             indirectly) any shares or any options to acquire shares in AFGRI.


      12.2. As at the date of this announcement, AFGRI Management (acting in concert with
             AgriGroupe) holds or controls (directly or indirectly) approximately 3,683,693 shares in
             AFGRI.

      12.3. As at the date of this announcement, AFGRI Management (acting in concert with
             AgriGroupe) holds approximately 3,974,650 options to acquire shares in AFGRI
             through the Share Option Scheme.


13.   SHAREHOLDER SUPPORT

      AgriGroupe has received irrevocable undertakings from certain Shareholders to vote/ or
      procure to vote of the stated number of Scheme Shares held by them as at the record date of
      the Scheme Meeting, either as a principal or on behalf of clients, in favour of the Scheme and
      the other resolutions to be proposed at the Scheme Meeting. Details of the shareholdings of
      these Shareholders are set out below:
       Shareholder                       Scheme Shares                               Effective voting
                                                                  Percentage
                                                subject to                          rights in respect
                                                               holding at the
                                       undertaking at the                          of the Scheme at
                                                               signature date
                                        signature date of                         the signature date
                                                               of irrevocable
                                              irrevocable                              of irrevocable
                                                                 undertaking
                                             undertaking                                 undertaking
                                                                           %
                                                                                                    %
       Allan Gray (Pty) Ltd                    86,934,813               23.2%                   25.8%
       (“Allan Gray”)*
       Sanlam Investment                       26,658,972                 7.1%                   7.9%
       Management (Pty) Ltd
       (“Sanlam”)*
       Stanlib Asset Management                46,000,000               12.3%                   13.7%
       (“Stanlib”)*
                                              159,593,785                42.6%                  47.4%

      * Allan Gray, Sanlam and Stanlib reserved the right to withdraw their support of the Proposed
      Transaction to the extent that following 10 business days post an announcement by the
      AFGRI Board relating to the receipt of a bona fide offer which is recommended by the AFGRI
      Board after taking into account, inter alia, the financial terms of the alternative proposal, the
      likelihood of such transaction being completed within a reasonable period of time and the
      financing risks related thereto, such offer being greater than R7.50, R7.70 and R7.70 per
      Scheme Share (“Superior Proposal”) as regards Allan Gray, Sanlam and Stanlib
      respectively, the AFGRI Board approving or recommending or entering into an agreement in
      respect of the Superior Proposal, and AgriGroupe has not proposed to amend its offer to
      provide for financial and/or other terms equivalent to or more favourable than those contained
      in the Superior Proposal.

14.   INDEPENDENT BOARD AND FAIR AND REASONABLE OPINION


      The Proposed Transaction is classified as an affected transaction in terms of the Companies
      Act. Accordingly, AFGRI has convened its Independent Board, comprised of Linda de Beer,
      Lwazi Koyana, Louis von Zeuner and Nick Wentzel, to consider the terms of the Proposed
      Transaction and the report of the Independent Expert on the Scheme.


      Whilst the contents of the Independent Expert's report and the confirmed views of the
      Independent Board will be detailed in the Circular, the Independent Board, together with the
      Independent Expert, has formed an initial view on the terms of the Proposed Transaction
      excluding the Reinvestment Option and subject to, inter alia, the receipt of the formal opinion
      from the Independent Expert confirming that the Scheme Consideration is fair and reasonable
      to Shareholders, the Independent Board recommends in principle that Shareholders vote in
      favour of the Proposed Transaction.
15.   POSTING OF CIRCULAR


      It is estimated that the Circular will be posted to Shareholders on or about 21 October 2013,
      which will include the notice of the Scheme Meeting to be held on or about 18 November
      2013 for the purpose of considering and, if deemed fit, passing the special resolutions
      required to approve the Scheme.


16.   WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT


      Following the release of this announcement, the Cautionary Announcement is hereby
      withdrawn and caution is no longer required to be exercised by AFGRI shareholders when
      dealing in their AFGRI shares.


17.   AGRIGROUPE RESPONSIBILITY STATEMENT


      AgriGroupe (to the extent that the information relates to AgriGroupe) accepts responsibility for
      the information contained in this announcement and, to the best of their respective knowledge
      and belief, the information is true and this announcement does not omit anything likely to
      affect the importance of the information included.


18.   INDEPENDENT BOARD RESPONSIBILITY STATEMENT


      The Independent Board (to the extent that the information relates to AFGRI) accepts
      responsibility for the information contained in this announcement and, to the best of their
      respective knowledge and belief, the information is true and this announcement does not omit
      anything likely to affect the importance of the information included.




Centurion
27 September 2013


Investment Bank advisor to AFGRI: Investec Bank Limited
Sponsor to AFGRI: Investec Bank Limited
Legal Advisor to AFGRI: Webber Wentzel
Communications Advisors to AFGRI: Edelman
Independent Expert to AFGRI: Ernst & Young Advisory Services Proprietary Limited
Corporate advisor to AgriGroupe: Rand Merchant Bank (a division of FirstRand Bank Limited)
Legal Advisor to AgriGroupe: Norton Rose Fulbright South Africa
Communications Advisors to AgriGroupe: Brunswick SA Limited

Date: 27/09/2013 05:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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