COUNTRY BIRD HOLDINGS LIMITED - Firm Intention to make a Cash Offer to Acquire Issued Share Capital and Withdrawal of Cautionary

Release Date: 25/09/2014 17:18
Code(s): CBH
 
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Firm Intention to make a Cash Offer to Acquire Issued Share Capital and Withdrawal of Cautionary

COUNTRY BIRD HOLDINGS LIMITED
Incorporated in the Republic of South Africa
Registration number 2005/008505/06
Share code CBH
ISIN: ZAE000094835
(“CBH”)



ANNOUNCEMENT OF A FIRM INTENTION BY BLACK RIVER FOOD FUND 2 LP
(“OFFEROR”) TO MAKE A CASH OFFER TO ACQUIRE THE ENTIRE ISSUED SHARE
CAPITAL OF CBH NOT HELD BY SYNAPP INTERNATIONAL LIMITED (“SYNAPP”) AND
WITHDRAWAL OF CBH’S CAUTIONARY ANNOUNCEMENT

1.   INTRODUCTION

     Further to the initial cautionary announcement released on Thursday, 14 August 2014 and as
     renewed from time to time (“Cautionary Announcement”), CBH shareholders are advised that on
     24 September 2014, CBH entered into an implementation agreement (“Implementation
     Agreement”) with the Offeror in terms of which the Offeror, inter alia, offered to acquire (“Offer”)
     the entire issued ordinary share capital of CBH excluding the ordinary shares held by Synapp
     (“Scheme Shares”) (“Proposed Transaction”) by means of a scheme of arrangement (“Scheme”)
     in terms of section 114 of the Companies Act 71 of 2008, as amended (“Companies Act”) for a
     cash consideration of R5.00 per Scheme Share (“Scheme Consideration”).

     CBH shareholders are further advised that Synapp, Colin Rodney James, Oak Nominees Limited,
     Marielle Regina Colette Chantreau Le Cluse and the Buzby Trust ("Concert Parties") are concert
     parties to the Proposed Transaction in terms of regulation 84 per 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”). The requisite forms in terms of the Takeover Regulations have been
     provided to the Takeover Regulation Panel for each of the Concert Parties.

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

     The purpose of this announcement (“Firm Intention Announcement”) is to advise CBH
     shareholders of the salient terms and conditions of the Scheme.

2.   INFORMATION ABOUT BLACK RIVER

     The Offeror is a food industry-focused private equity fund that invests in global emerging markets.
     The sole member of the Offeror’s general partner is Black River Asset Management LLC (“Black
     River”), a global asset management firm specialising in alternative investment strategies for a
     broad set of institutional investors. Black River has been a registered investment advisor with the
     U.S. Securities and Exchange Commission since 2003. Black River’s investment professionals are
     located in 12 countries across five continents.

3.   RATIONALE FOR THE PROPOSED TRANSACTION
     Black River, through the Offeror, invests in leading companies in the food industry that can scale
     efficiently, optimise procurement and distribution, and manage risk throughout the value chain to
     sustainably produce safe, high quality food in emerging markets. Black River believes CBH fits this
     profile, but understands that substantial resources will be required over the short- to medium-term to
     effectively realise CBH’s growth strategy in Africa.

     As such, if the Proposed Transaction is implemented, the Offeror will commit further funds to
     strengthen CBH’s balance sheet and improve its agility, in a private ownership structure that will
     allow management more flexibility to implement and execute its long-term, customer-focused plans.

     The Scheme Consideration is at an attractive premium of 33.4% to the 30 day volume weighted
     average price (“VWAP”) as at the date of the Cautionary Announcement. The table below
     illustrates the Scheme Consideration premium:


                                                      Prior to the Cautionary
                                                  Announcement (14 August 2014)                   Premium (%)
                                                                    (1)


      Market price                                                 3.80                               31.6%
      30-day VWAP                                                  3.75                               33.4%
      60-day VWAP                                                  3.74                               33.5%
      90-day VWAP                                                  3.25                               54.1%

     1. Closing CBH share price and VWAP for the 30, 60 and 90 trading days up to and including 14 August 2014, being the
        last trading day prior to the publication of the Cautionary Announcement.


     The Offer is fully-funded, is not subject to any further due diligence, and, as the Offeror will only
     acquire a minority shareholding, the Offeror believes its offer requires fewer regulatory approvals.

4.   IFC SUPPORT

     The International Finance Corporation (“IFC”) has granted its consent for the Proposed
     Transaction, which is required in terms of their existing rights per the convertible loan agreement
     entered into between CBH and IFC in April 2013.

5.   MATERIAL TERMS OF THE PROPOSED TRANSACTION

     5.1. Proposed Transaction mechanics

     5.1.1.        The Offeror intends to acquire the Scheme Shares by way of a scheme of
                   arrangement in terms of section 114 of the Companies Act to be proposed by the CBH
                   board of directors (“CBH Board”) between CBH and the holders of Scheme Shares
                   (“CBH Shareholders”).

     5.1.2.        The Scheme will be implemented as follows:

     5.1.2.1.              The Scheme will be proposed by the CBH Board between CBH and the CBH
                           Shareholders.

     5.1.2.2.              The Proposed Transaction will be subject to the fulfilment or waiver of the
                           suspensive conditions referred to in paragraphs 6 and 7 below.
     5.1.2.3.             The purchase price payable for the Scheme Shares, and the terms of payment,
                          will be as is set out in paragraph 5.2 below.

     5.1.2.4.             In the event that the Scheme is successfully implemented, CBH’s listing on the
                          JSE will be terminated.

     5.2. Scheme Consideration:

     5.2.1.         In terms of the Scheme, the Offeror will pay to the CBH Shareholders a cash
                    consideration of R5.00 per Scheme Share.


6.   CONDITIONS PRECEDENT TO THE POSTING OF THE SCHEME CIRCULAR TO CBH
     SHAREHOLDERS

     6.1. The posting of the circular to CBH Shareholders in respect of the Scheme (“Circular”) is
          subject to the fulfilment, or waiver (in whole or in part), of, inter alia, the following conditions
          precedent:

     6.1.1.      the CBH Board has retained an independent expert (“Independent Expert”):

     6.1.1.1.             in terms of section 114(2) of the Companies Act and the Takeover Regulations
                          and the Independent Expert has prepared and issued the report concerning the
                          Scheme in terms of section 114(3) and Regulation 90 (“Report”); and

     6.1.1.2.             in the Report, the Independent Expert expressed the opinion that the Scheme
                          Consideration is fair and reasonable to the CBH Shareholders;

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

     6.1.3.      CBH Shareholders holding not less than 50% of the Scheme Shares providing the Offeror
                 with irrevocable undertakings to vote in favour of the Scheme;

     6.1.4.      all requisite approvals being received from the JSE, the Financial Surveillance
                 Department of the South African Reserve Bank (acting through an authorised dealer) and
                 the Takeover Regulation Panel established in terms of section 196 of the Companies Act
                 (“Takeover Panel”) for the posting of the Circular; and

     6.1.5.      the receipt of all necessary consents that are required as a result of the Proposed
                 Transaction in respect of the material contracts to which any member of the CBH group is
                 a party, and/or CBH or its relevant subsidiary providing written notice, to the extent
                 required, to the counterparty to any of the material contracts to which any member of the
                 CBH group is a party.

     6.2.     The conditions set out in paragraph 6.1.2, 6.1.3 and 6.1.5 above are for the benefit of the
              Offeror and may be waived by the Offeror in its sole discretion by notice in writing to CBH.
              The conditions set out in paragraphs 6.1.1 and 6.1.4 are of a regulatory nature and cannot
              be waived.


7.   CONDITIONS PRECEDENT TO THE IMPLEMENTATION OF THE SCHEME

     7.1.     The Scheme will be subject to the fulfilment, or waiver (in whole or in part), of the following
              conditions precedent by not later than 90 days after the publication of this Firm Intention
              Announcement, or such later date as the Offeror and CBH may agree to in writing:

     7.1.1.         the approval of the Scheme by the requisite majority of CBH Shareholders, as
                    contemplated in section 115(2) of the Companies Act, and:

     7.1.1.1.             to the extent required, the approval of the implementation of such resolution by
                          the Court; and

     7.1.1.2.             if applicable, CBH not treating the aforesaid resolution as a nullity, as
                          contemplated in section 115(5)(b) of the Companies Act;

     7.1.2.         CBH Shareholders holding more than 10% of the Scheme Shares not having
                    exercised their appraisal rights by giving valid demands in terms of section 164(7) of
                    the Companies Act, within 30 business days following the CBH Shareholders’ meeting
                    convened to approve the Scheme (“Scheme Meeting”), provided that, in the event
                    that any CBH 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 10% of the Scheme Shares, this
                    condition shall be deemed to have been fulfilled at the time of the Scheme Meeting;

     7.1.3.         the unconditional approvals, consents or waivers in respect of the Proposed
                    Transaction (or if such approvals, consents or waivers are conditional, such conditions
                    being satisfactory to the Offeror and the Offeror’s relevant acceptance thereof to be
                    evidenced in writing to CBH) having been obtained from:

     7.1.3.1.             the Takeover Panel (in terms of a compliance certificate to be issued in terms of
                          section 121 (b)(i) of the Companies Act);

     7.1.3.2.             the JSE for the termination of the listing of CBH;

     7.1.3.3.             the Financial Surveillance Department of the South African Reserve Bank or if
                          required, their authorised dealers, in respect of the Circular; and

     7.1.4.         by the date on which the last of the abovementioned conditions precedent is fulfilled or
                    waived (as the case may be) none of the following events or circumstances having
                    occurred or arisen in respect of CBH:

     7.1.4.1.             any corporate action, legal proceedings or other procedure or step (including an
                          application to court, proposal of a resolution or convening of a meeting of
                          shareholders, members, directors or other officers) is taken by any person with
                          a view to:

                            i.    a moratorium, compromise, composition, business rescue or similar
                                  arrangement with any of its creditors; or
                          ii.   its winding-up, dissolution or commencement of business rescue
                                proceedings, or for the seeking of relief under any applicable bankruptcy,
                                insolvency, company or similar law, or any such resolution; or

                         iii.   the enforcement of any security interest over any of its assets;

     7.1.4.2.           the value of its assets is less than its liabilities (taking into account contingent
                        and prospective liabilities) or it is unable to pay its debts as they fall due;

     7.1.4.3.           the Offeror has not given written notice to CBH of a material adverse change
                        (“MAC”) (being an event, fact or circumstance which has, or will reasonably be
                        expected to have, within 12 months of the date of the Implementation
                        Agreement, an adverse impact of more than R25,000,000 on the assumed
                        equity value of CBH and its subsidiaries. MACs shall exclude (i) any changes in
                        the general economic conditions that affect the industry in which CBH and its
                        subsidiaries conducts their business (provided that CBH and its subsidiaries,
                        taken as a whole, are not affected by the change in a materially
                        disproportionate manner relative to other similarly situated participants in the
                        industry or markets in which they operate); (ii) the effect of any action taken by
                        the Offeror; and (iii) any effect resulting from compliance with the terms of the
                        Implementation Agreement or the consummation of the Proposed Transaction);
                        or

     7.1.4.4.           the Offeror has given written notice of a MAC to CBH (“MAC Notice”) and an
                        independent expert agreed between the Offeror and CBH has, within
                        10 business days of the date of such MAC Notice, advised the Offeror and CBH
                        in writing that a MAC has not occurred. If the appointed independent expert
                        advises the Offeror and CBH in writing that a MAC has occurred, and this
                        condition precedent has not been waived, the Scheme will not become
                        effective.

     7.2.   The conditions set out in paragraphs 7.1.2 and 7.1.4 above are for the benefit of the Offeror
            and may be waived by the Offeror in its sole discretion by notice in writing to CBH. The
            conditions set out in paragraphs 7.1.1 and 7.1.3 are of a regulatory nature and cannot be
            waived.


8.   BREAK FEE

     The Implementation Agreement provides for a break fee equal to the Offeror’s out of pocket costs
     (including advisory costs), up to a maximum of 1% of the aggregate Scheme Consideration, which
     would be payable by CBH if:

     8.1.   the Independent Board does not recommend the Scheme or if it withdraws or materially
            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;
      8.2.     after the publication of this Firm Intention Announcement but before the date of the Scheme
               Meeting, any of the following events occur:

      8.2.1.         CBH or the CBH Board approves or recommends and/or enters into an agreement to
                     effect an alternative proposal;

      8.2.2.         the CBH Board or the Independent Board determines not to implement the Scheme
                     by:

      8.2.2.1.             refusing to take the required steps to obtain approval of the Scheme by the
                           requisite majority of CBH Shareholders as contemplated in section 115(2) of the
                           Companies Act; or

      8.2.2.2.             treating the shareholder approval as a nullity, as contemplated in section
                           115(5)(b) of the Companies Act, unless requested to do so by the Offeror.

9.    FUNDING OF THE PROPOSED TRANSACTION

      The Offeror 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 FirstRand Bank Limited, acting through its Rand Merchant Bank division, in
      compliance with Takeover Regulation 111(4)(a) and 111(5).

10.   SUBSCRIPTION AGREEMENT

      The Offeror and CBH have also entered into a subscription agreement whereby the Offeror has
      committed to providing additional financial resources to CBH post implementation of the Proposed
      Transaction.

11.   VOTING RIGHTS AND SHAREHOLDERS SUPPORT

      As at the date of this announcement, the Concert Parties hold or control (directly or indirectly)
      approximately 173,237,688 ordinary shares in CBH, which equates to approximately 85.57% of all
      the issued ordinary shares of CBH. The Concert Parties, excluding Synapp, holding 11,366,952
      Scheme Shares will not be entitled to vote these Scheme Shares in CBH held by them at the
      Scheme Meeting.

      The Offeror has received irrevocable undertakings from certain CBH Shareholders to vote or
      procure to vote 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 CBH
      Shareholders are set out below:

                                                   Percentage holding
                              Scheme Shares         of all issued CBH        Effective percentage voting
                                  subject to        ordinary shares at    rights in respect of the Scheme
                             undertaking at the   the signature date of        at the signature date of
         Shareholder         signature date of         irrevocable           irrevocable undertaking
                                 irrevocable           undertaking
                                 undertaking                                              (%)
                                                             (%)
        Sanlam
        Investment               9,316,526                 4.6%                        31.9%
        Management
        Peregrine
                                 4,854,332                 2.4%                        16.6%
        Equities
        Hampden
                                 2,000,000                 1.0%                         6.8%
        Capital
        BlackStar Fund
                                 2,256,772                 1.1%                         7.7%
        Managers
        Total                   18,427,630                 9.1%                        63.1%
      
      Note
      1  The voting rights are calculated on the basis of excluding the Concert Parties’ voting rights

12.   DELISTING

      An application will be made by CBH to the JSE to terminate the listing of CBH shares on the JSE
      upon implementation of the Scheme.

13.   INDEPENDENT BOARD AND FAIR AND REASONABLE OPINION

      The Proposed Transaction is classified as an affected transaction in terms of the Companies Act.
      Accordingly, CBH has convened an Independent Board, comprised of Ian Isdale, Raymond
      Gibbison and Bryan Kent, to consider the terms of the Scheme and the report of the Independent
      Expert on the Scheme.

      Whilst the contents of the Independent Expert's report and the opinion 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 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 CBH Shareholders, the Independent Board recommends in
      principle that CBH Shareholders vote in favour of the Proposed Transaction.

14.   POSTING OF CIRCULAR

      It is expected that the Circular will be posted to CBH Shareholders on or about 17 October 2014,
      which will include the notice of the Scheme Meeting to be held on or about 14 November 2014 for
      the purpose of considering and, if deemed fit, passing the special resolutions required to approve
      the Scheme. A further announcement setting out the salient dates and times in relation to, inter
      alia, the posting of the Circular and the Scheme Meeting will be released in due course.

15.   BENEFICIAL INTEREST AND ACTING AS PRINCIPAL

      As at the date of this announcement, the Offeror does not currently hold or control (directly or
      indirectly) any interest in the issued share capital of CBH.

      The Offeror has confirmed that it is the ultimate proposed purchaser of all the Scheme Shares and
      that it is not acting as agent or broker for any other party.


16.   WITHDRAWAL OF CBH CAUTIONARY ANNOUNCEMENT
      Following the release of this Firm Intention Announcement, the Cautionary Announcement
      originally published by CBH on 14 August 2014 and as renewed from time to time is hereby
      withdrawn and caution is no longer required to be exercised by CBH Shareholders when dealing in
      CBH shares.

17.   CBH BOARD RESPONSIBILITY STATEMENT

      The Independent Board accepts responsibility for the information contained in this Firm Intention
      Announcement to the extent that it relates to CBH. To the best of its knowledge and belief, such
      information contained in this Firm Intention Announcement is true and nothing has been omitted
      which is likely to affect the importance of such information.

18.   BLACK RIVER RESPONSIBILITY STATEMENT

      The Offeror (to the extent that the information relates to the Offeror) 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.




Johannesburg
25 September 2014

Transaction Advisor and Sponsor to CBH
Investec Bank Limited

Legal Advisor to CBH
Kern & Partners

Legal Advisor to the Offeror
Webber Wentzel

Legal Advisor to IFC
ENSafrica

Independent Expert
Grant Thornton

Merchant Bank to the Offeror
FirstRand Bank Limited, acting through its Rand Merchant Bank division

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