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Joint firm intention announcement by Zeder Investments Ltd and Agri Voedsel Ltd
Zeder Investments Limited
(Incorporated in the Republic of South Africa)
Registration Number: 2006/019240/06
Share Code: ZED
ISIN Code: ZAE000088431
(“Zeder”)
Agri Voedsel Limited
(Incorporated in the Republic of South Africa)
Registration Number: 2007/015880/06
(“AVL”)
JOINT ANNOUNCEMENT OF THE FIRM INTENTION OF ZEDER TO MAKE AN
OFFER TO ACQUIRE ALL THE ORDINARY SHARES IN AVL, NOT ALREADY
HELD BY ZEDER, BY WAY OF A SCHEME OF ARRANGEMENT
1. INTRODUCTION
1.1 Shareholders are referred to Zeder’s SENS announcement
dated 20 June 2014 and are advised that the
preconditions referred to in that announcement have now
been fulfilled. Accordingly, shareholders are hereby
notified of Zeder’s firm intention to make an offer to
acquire all ordinary shares in AVL, not already held by
Zeder, by way of a scheme of arrangement (“the Scheme”)
("Firm Intention Offer").
1.2 AVL is an investment holding company, having as its
only investment, a shareholding in Pioneer Food Group
Limited (“Pioneer Foods”). The shares held by AVL in
Pioneer Foods represent a 30.4% economic interest and a
26.3% voting interest in Pioneer Foods. Zeder currently
holds 48.5% of AVL.
1.3 The implementation of the Scheme will amount to a
category 1 acquisition by Zeder in terms of the
Listings Requirements of the JSE Limited (“JSE”) (“JSE
Listings Requirements”).
1.4 The purpose of this announcement is to advise Zeder
shareholders and AVL shareholders of the terms and
conditions of the Firm Intention Offer.
2. RATIONALE FOR THE FIRM INTENTION OFFER
2.1 Rationale for Zeder
Zeder wishes to acquire all AVL shares not already held
by Zeder, in order to increase its exposure to AVL’s
underlying interest in Pioneer Foods.
2.2 Rationale for AVL
2.2.1 AVL shares currently trade through AVL’s over-the-
counter trading (“OTC”) platform.
2.2.2 Following the consultation paper published by the
Financial Services Board (“FSB”) in December 2013,
there is great uncertainty as to whether OTC trading
platforms will be permitted to continue operating in
future without the facilitator of the OTC platform
(in this case, AVL) applying for a full exchange
license.
2.2.3 Should AVL not register as an exchange or the FSB
not extend OTC trading, AVL will be required to
cease its OTC trading activities. AVL needs to take
action in order to protect value for its
shareholders and believes that the Scheme should be
considered in this context. OTC trading in AVL
shares will be suspended from close of business on
Monday, 30 June 2014 until further notice.
2.2.4 The Scheme will provide AVL shareholders with –
2.2.4.1 an opportunity to liquidate their investment in
AVL;
2.2.4.2 a more liquid instrument in a listed entity,
Zeder;
2.2.4.3 a mechanism to unlock the discount in the
current AVL share price; and
2.2.4.4 an opportunity to diversify their investment in
AVL into a more diversified agri, food and
beverage portfolio.
3. MECHANICS OF THE SCHEME
3.1 The Scheme will constitute an “affected transaction” as
defined in section 117(c) of the Companies Act, 2008
(“Companies Act”) and will be regulated by the
Companies Act, the Companies Regulations, 2011
(“Companies Regulations”) and the Takeover Regulation
Panel (“TRP”).
3.2 The Scheme will be implemented in terms of section 114
of the Companies Act and will be proposed by the AVL
board of directors (“AVL Board”) between AVL and its
shareholders other than Zeder.
3.3 The Firm Intention Offer will be subject to the
conditions precedent set out in paragraph 4.2 below
("Firm Intention Offer Conditions").
3.4 The Scheme will be subject to the conditions precedent
set out in paragraph 5.1 below ("Scheme Conditions").
4. THE FIRM INTENTION OFFER
4.1 Material terms of the Firm Intention Offer
4.1.1 The Firm Intention Offer will be made on the basis
that –
4.1.1.1 Zeder will acquire all ordinary shares in AVL
not already held by Zeder (“Scheme Shares”);
4.1.1.2 following the implementation of the Scheme, AVL
will be a wholly-owned subsidiary of Zeder
(Zeder confirms that it will adhere to the
provisions of paragraph 10.21 of Schedule 10 of
the JSE Listings Requirements, in this regard);
4.1.1.3 once all the Firm Intention Offer Conditions and
the Scheme Conditions have been fulfilled and
the Scheme is implemented, AVL shareholders will
receive the scheme consideration of 16.2
(sixteen point two) listed Zeder shares for
every 1 (one) unlisted Scheme Share disposed of
in terms of the Scheme, rounded to the nearest
whole number and credited as fully paid (“Scheme
Consideration”) (“Swap Ratio”);
4.1.1.4 the Scheme Consideration will not have a cash
alternative; and
4.1.1.5 the Scheme Consideration will be issued on
market and will be listed on the main board of
the JSE.
4.1.2 Zeder confirms that the Scheme Consideration has
been calculated on the basis set out below –
4.1.2.1 the Scheme Consideration has been calculated on
a like-for-like basis, based on the see-through
sum-of-the-parts value per share of Zeder of
R6.11 per share, as at 4 June 2014, and the see-
through value per share of AVL of R99.00 per
share, as at 4 June 2014;
4.1.2.2 the see-through sum-of-the-parts value per share
(“See-through SOTP”) of Zeder is calculated
using the quoted market prices for all JSE-
listed and over-the-counter traded investments,
apart from using the see-through market price of
Pioneer Foods for Zeder’s investment in AVL, and
directors valuations for unlisted, unquoted
investments; and
4.1.2.3 the see-through value per share (“See-through
value”) of AVL is calculated using the see-
through market price for AVL’s investment in
Pioneer Foods.
4.2 FIRM INTENTION OFFER CONDITIONS
4.2.1 The posting of the scheme circular to AVL
shareholders, other than Zeder, in relation to the
Scheme ("Scheme Circular") is subject to the
fulfilment of the Firm Intention Offer Conditions
that, by no later than 30 August 2014 –
4.2.1.1 the independent expert appointed to advise the
independent board of AVL furnishes an opinion
that the terms and conditions of the Scheme are
fair and reasonable to AVL shareholders; and
4.2.1.2 all requisite approvals have been received from
the JSE, the TRP and the Financial Surveillance
Department of the South African Reserve Bank for
the posting of the Scheme Circular, to the
extent required.
4.2.2 The Firm Intention Offer Condition in paragraph
4.2.1.2 cannot be waived.
4.2.3 The Firm Intention Offer Condition in paragraph
4.2.1.1 may be waived by Zeder upon written notice
to AVL, prior to the date for fulfilment of that
Firm Intention Offer Condition.
4.2.4 Zeder will be entitled to extend the date for the
fulfilment of any of the Firm Intention Offer
Conditions by up to 30 days, in its own discretion,
upon written notice to AVL, but shall not be
entitled to extend the date to a date later than the
aforesaid 30 day period without the prior written
consent of AVL.
5. THE SCHEME CONDITIONS
5.1 The Scheme will be subject to (and will become
operative on the relevant operative date upon) the
fulfilment of the following conditions precedent on or
before 30 September 2014 –
5.1.1 that, as the implementation of the Scheme would
amount to a category 1 acquisition by Zeder in terms
of the JSE Listings Requirements, the Scheme be
approved by Zeder shareholders as required under the
JSE Listings Requirements;
5.1.2 that, as the voting power of the Scheme
Consideration shares will exceed 30% of the voting
power of all the shares held by Zeder shareholders
immediately prior to the issue of same, the issue of
the Scheme Consideration by Zeder be approved by
Zeder shareholders by way of a special resolution
under section 41(3) of the Companies Act;
5.1.3 that the Scheme be approved by the requisite
majority of AVL shareholders, as contemplated in
section 115(2)(a) of the Companies Act, and, to the
extent required, by a High Court in terms of section
115(2)(c) of the Companies Act, and, if applicable,
that AVL does not treat the aforesaid shareholder
resolution as a nullity, as contemplated in section
115(5)(b) of the Companies Act;
5.1.4 that, in relation to any objections to the Scheme by
AVL shareholders –
5.1.4.1 no AVL shareholders give notice objecting to the
Scheme, as contemplated in section 164(3) of the
Companies Act and vote against the resolution
proposed at the general meeting to approve the
Scheme (“Scheme Meeting”); or
5.1.4.2 if AVL shareholders give notice objecting to the
Scheme, as contemplated in section 164(3) of the
Companies Act, and vote against the resolution
proposed at the Scheme Meeting, AVL shareholders
holding no more than 5% of all Scheme Shares
eligible to be voted at the Scheme Meeting give
such notice and vote against the resolutions
proposed at the Scheme Meeting; or
5.1.4.3 if AVL shareholders holding more than 5% of all
Scheme Shares eligible to vote at the Scheme
Meeting give notice objecting to the Scheme, as
contemplated in section 164(3) of the Companies
Act, and vote against the resolution proposed at
the Scheme Meeting, the relevant AVL
shareholders do not exercise their appraisal
rights, by giving valid demands in terms of
sections 164(5) to 164(8) of the Companies Act
within 30 business days following the Scheme
Meeting, in respect of more than 5% of the
Scheme shares eligible to be voted at the Scheme
Meeting; and
5.1.5 that, in respect of the implementation of the Scheme
and only to the extent that same may be applicable,
the approval of the JSE, the TRP and any other
relevant regulatory authorities (either
unconditionally or subject to conditions acceptable
to Zeder) be obtained, it being recorded that on 26
February 2014 the Competition Tribunal of South
Africa approved in advance the acquisition of
control by Zeder over AVL (provided that this occurs
by no later than 25 February 2015).
5.2 The Scheme Conditions in paragraphs 5.1.1, 5.1.2, 5.1.3
and 5.1.5 cannot be waived.
5.3 The Scheme Condition in paragraph 5.1.4 may be waived
by Zeder upon written notice to AVL, prior to the date
for fulfilment of the relevant Scheme Condition.
5.4 Zeder will be entitled to extend the date for the
fulfilment of any of the Scheme Conditions, by up to 60
days, in its own discretion, upon written notice to
AVL, but shall not be entitled to extend the date to a
date later than the aforesaid 60 day period without the
prior written consent of AVL.
6. ACTING AS PRINCIPAL, COMMITMENTS FROM SHAREHOLDERS
6.1 Zeder confirms that it is the ultimate prospective
purchaser of the Scheme Shares and is acting alone and
not in concert with any party.
6.2 Zeder is in the process of approaching AVL shareholders
for irrevocable commitments to vote in favour of the
AVL resolution to be tabled at the Scheme Meeting to
approve the Scheme. Details regarding the irrevocable
commitments obtained by Zeder from AVL shareholders
will be announced prior to the posting of the Scheme
Circular.
6.3 Zeder confirms that it has already received commitments
from Zeder shareholders holding approximately 75% of
Zeder shares in issue, to vote in favour of the
required Zeder shareholder resolutions.
7. VOLUNTARY GENERAL OFFER
7.1 In the unlikely event that the Scheme fails, Zeder
intends to make a voluntary general offer to all AVL
shareholders to acquire their AVL shares (“General
Offer”).
7.2 The consideration to be offered in terms of the General
Offer, if it is made, will be identical to the Scheme
Consideration.
7.3 Zeder is in the process of acquiring irrevocable
commitments from AVL shareholders in this regard.
8. AUTHORISED SHARE CAPITAL
Zeder confirms that it has sufficient authorised share
capital available to settle the Scheme Consideration shares
to be issued to AVL shareholders in terms of the Scheme.
9. PRO FORMA FINANCIAL EFFECTS ON AVL SHAREHOLDERS
9.1 The pro forma financial effects on AVL shareholders are
the responsibility of the AVL directors and have been
prepared for illustrative purposes only to provide
information about how the Scheme may affect the
financial position of the AVL shareholders. The pro
forma financial effects on AVL shareholders have been
calculated in respect of 1 AVL Scheme Share held before
the Scheme and 16.2 Zeder shares held after the Scheme.
9.2 The pro forma financial effects are presented for
illustrative purposes only and, because of their
nature, may not fairly present the actual financial
effects of the Scheme on AVL shareholders.
Audited
results
for the
year ended
September Pro forma
2013 after
(cents)(1) (cents)(2) Change
Net asset value per
share 3 721.1 9 175.0 146.6%
Tangible net asset value
per share 3 721.1 8 753.3 135.2%
Adjusted headline
earnings per share 428.4 463.3 8.2%
Headline earnings per
share 365.4 388.8 6.4%
Attributable earnings
per share 361.1 2 765.3 665.8%
See-through value per
share as at 4 June 2014
(rand) 99.00 99.00 -
Notes and assumptions:
1. Extracted, without adjustment, from the audited results
of AVL for the year ended 30 September 2013, except for
the See-through value per share, calculated as set out
in paragraph 4.1.2.3.
2. The “Pro forma after” column sets out the position of an
AVL shareholder following implementation of the Scheme,
now owning Zeder shares. The financial information is
based on Zeder’s financial effects pursuant to
implementation of the Scheme (for the year ended 28
February 2014), multiplied by the Swap Ratio of 16.2 to
provide the pro forma financial effects for AVL
shareholders.
10. PRO FORMA FINANCIAL EFFECTS ON ZEDER SHAREHOLDERS
10.1 The pro forma financial effects on Zeder shareholders
are the responsibility of the Zeder directors and have
been prepared for illustrative purposes only to provide
information about how the Scheme may affect the
financial position of the Zeder shareholders.
10.2 The pro forma financial effects are presented for
illustrative purposes only and, because of their
nature, may not fairly present the actual financial
effects of the Scheme on Zeder shareholders. Please
note the substantial non-headline gains, as detailed in
note 2 (c) and (d) below, which predominantly accounts
for the increase in “Attributable earnings per share”
in the “Pro forma after” column, are merely accounting
entries in terms of International Financial Reporting
Standards and by no means represent a financial gain to
Zeder.
Audited
results
for the
year ended
February Pro forma
2014 after
(cents)(1) (cents)(2) Change
Net asset value per
share 368.0 566.4 53.9%
Tangible net asset value
per share 329.6 540.3 63.9%
Recurring headline
earnings per share 29.8 28.6 (4.0%)
Headline earnings per
share 25.8 24.0 (7.0%)
Attributable earnings
per share 29.7 170.7 474.7%
See-through SOTP per
share as at 4 June
2014(rand) 6.11 6.11 -
Notes and assumptions:
1. Extracted, without adjustment, from the audited results
of Zeder for the year ended 28 February 2014, except for
the See-through SOTP per share, calculated as set out in
paragraph 4.1.2.2.
2. The pro forma results after the acquisition incorporates
the following financial effects:
(a) The acquisition of 28 620 719 AVL shares not already
held by Zeder (by way of the Scheme) for a
consideration of 463 655 648 Zeder shares.
(b) The elimination of Agri Voedsel's equity and reserves
at acquisition.
(c) A non-headline fair value gain of R1 020m on the
remeasurement of the pre-acquisition non-controlling
interest to fair value.
(d) A non-headline gain on business combination
of R1 124m.
(e) Transaction costs estimated to be approximately R9m.
(f) With the exception of the adjustments set out in (c)
to (e) above, all adjustments are expected to have a
continuing effect.
3. The pro forma financial effects do not include any
adjustment to the performance fee that was paid to PSG
in terms of the management agreement for the year ended
28 February 2014, due to the uncertain nature thereof.
11. INDEPENDENT BOARD, OPINION AND RECOMMENDATIONS
11.1 In accordance with the Companies Regulations, an
independent AVL board, comprised of independent non-
executive directors, has been appointed by the AVL
Board, to evaluate the Scheme (“Independent Board”).
11.2 The Independent Board will appoint an independent
expert acceptable to the TRP to provide the Independent
Board with external advice in regard to the Scheme and
to make appropriate recommendations to the Independent
Board for the benefit of AVL shareholders. The
substance of the external advice and the opinion of the
Independent Board on the Scheme will be detailed in the
Scheme Circular.
12. FURTHER DOCUMENTATION AND SALIENT DATES
12.1 Further details of the Scheme will be included in the
Scheme Circular that will, subject to the fulfilment of
the Firm Intention Offer Conditions, be posted in due
course to AVL shareholders. The Scheme Circular will,
inter alia, also contain a notice of the Scheme
Meeting, a form of proxy and a form of surrender and
transfer.
12.2 In addition, Zeder will in due course send a category 1
acquisition circular to its shareholders, as required
under the JSE Listings Requirements, while a
prospectus/revised listing particulars will be sent to
both Zeder shareholders and AVL shareholders.
12.3 The Scheme will become effective and be implemented
following the fulfilment of the Firm Intention Offer
Conditions and the Scheme Conditions. The salient dates
in relation to the Scheme will be published in due
course.
13. INDEPENDENT BOARD RESPONSIBILITY STATEMENT
The Independent Board accepts responsibility for the
information contained in this announcement which relates to
AVL and confirms that, to the best of its knowledge and
belief, such information which relates to AVL is true and
the announcement does not omit anything likely to affect
the importance of such information.
14. ZEDER BOARD RESPONSIBILITY STATEMENT
The board of directors of Zeder accepts responsibility for
the information contained in this announcement which
relates to Zeder and confirms that, to the best of its
knowledge and belief, such information which relates to
Zeder is true and the announcement does not omit anything
likely to affect the importance of such information.
15. WITHDRAWAL OF CAUTIONARY ANNOUNCEMENTS
15.1 Zeder shareholders are referred to Zeder’s cautionary
announcement on 18 June 2014, as renewed on 20 June
2014, and are advised that, whereas the terms of the
Scheme have now been announced, caution is no longer
required to be exercised by shareholders when dealing
in their Zeder securities.
15.2 AVL shareholders are referred to AVL’s cautionary
announcement on 19 June 2014, as renewed on 20 June
2014, and are advised that, whereas the terms of the
Scheme have now been announced, caution is no longer
required to be exercised by shareholders when dealing
in their AVL securities.
Stellenbosch
25 June 2014
PSG Capital: Transaction adviser and sponsor to Zeder
Date: 25/06/2014 05:40:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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