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Acquisition of Tydstroom’s Hartebeespoort Abattoir
SOVEREIGN FOOD INVESTMENTS LIMITED
Incorporated in the Republic of South Africa
Registration Number 1995/003990/06
JSE Code: SOV
ISIN Number: ZAE000009221
(“Sovereign”)
ACQUISITION OF TYDSTROOM’S HARTEBEESPOORT ABATTOIR
1. INTRODUCTION
Sovereign is pleased to announce that Crown Chickens (Proprietary) Limited (the
“Purchaser”), a wholly owned subsidiary of Sovereign, has entered into an exclusive
agreement (the “Agreement”) to acquire the Tydstroom Abattoir, located in Hartebeespoort,
Gauteng (the “Abattoir”), as a going concern from Quantum Proprietary Limited (the
“Sellers”), a wholly owned subsidiary of Quantum Foods Holdings Limited (“Quantum
Foods”) (the “Transaction”).
Sovereign will be acquiring the fixed assets and property associated with the Abattoir, but not
any working capital, liabilities, brands or other intangible assets.
In terms of the Transaction, Sovereign will sign a long term broiler supply agreement with
Quantum Foods for the supply of broiler birds to the Abattoir.
2. OVERVIEW OF THE ABATTOIR
The Abattoir currently produces fresh and frozen poultry products predominantly for the
Gauteng market. The majority of its products are marketed through major national retail
stores and food services channels under the “Tydstroom” and various house brands. The
Abattoir currently has a single shift production capacity of 250 000 birds per week.
3. RATIONALE FOR THE TRANSACTION
Sovereign has achieved consistent growth in sales and profitability over the past 3 years. The
Transaction allows Sovereign to expand its production volumes and geographical footprint in
order to meet growing customer demand, in line with Sovereign’s stated strategic objectives.
The Transaction satisfies all the criteria in Sovereign’s expansion strategy, namely:
- Acquisition of a strategically located new production facility, commissioned less than
2 years ago.
- A 28% increase in production capacity to 1 150 000 birds per week.
- Greater access to the major market of Gauteng and to Sovereign’s largest customers.
- A long term broiler supply agreement with Quantum Foods, a strong supplier.
All post Transaction sales from the Abattoir will be made under current Sovereign brands.
4. TRANSACTION CONSIDERATION
The purchase consideration payable is R120 000 000.
Sovereign will be financing the Transaction through a combination of new facilities and cash
resources.
5. CONDITIONS PRECEDENT
The Transaction is subject to the following conditions precedent, namely:
5.1 by no later than 31 December 2015, the unconditional approval, in writing, of the
applicable competition authorities in terms of the Competition Act, No. 89 of 1998 in
respect of the Transaction (or if such approval is conditional, each of the Sellers, the
Purchaser and Sovereign (the “Parties”) having approved such condition in writing and
delivered such written approval to the other Parties) be obtained;
5.2 by no later than 31 December 2015, to the extent necessary, all regulatory consents and
other approvals, including but not limited to the approval of the Johannesburg Stock
Exchange (“JSE”), be obtained;
5.3 by no later than 30 days from the date of signature of the Agreement being 7 May 2015
(“Date of Signature”), the Purchaser completing a due diligence investigation to its
satisfaction;
5.4 by no later than 45 days from the Date of Signature, the Parties concluding a sale of
business agreement in respect of the Transaction, containing all the usual provisions
required for a transaction of this nature;
5.5 by no later than 45 days from the Date of Signature the Sellers delivering to the
Purchaser a copy of any special resolutions required in terms of the Companies Act, No.
71 of 2008 (as amended); and
5.6 by no later than 45 days from the Date of Signature the Parties concluding a broiler
supply agreement, the material terms of which have been agreed to between the Parties.
The Parties may, by agreement in writing and by no later than the dates stipulated for
fulfilment thereof, waive or extend the date of fulfilment or waiver of all or any of the
conditions precedent contained in paragraphs 5.1 to 5.6 above (unless any such condition is
in law incapable of waiver).
6. EFFECTIVE DATE
The effective date of the Transaction, being 5 business days after all conditions precedent, as
set out in paragraphs 5.1 to 5.6 above have been fulfilled or waived, is estimated to be
30 November 2015 (the “Effective Date”).
7. EXCLUSIVITY
The Sellers have granted exclusivity to the Purchaser and Sovereign from the Date of
Signature until the earlier of: (i) the Effective Date; or (ii) the date on which the Agreement
fails as a result of the non-fulfilment of any of the conditions precedent, as set out in
paragraphs 5.1 to 5.6 above, or is terminated.
8. CATEGORISATION
The Transaction is categorised as a category 2 transaction in terms of section 9.5(a) of the
JSE Listings Requirements and accordingly no shareholder approval is required.
Port Elizabeth
11 May 2015
Legal advisors to Sovereign
Webber Wentzel and Pagdens Incorporated
Sponsor to Sovereign
One Capital
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