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Acquisition of the share equity and claims of Pakco Proprietary Limited ("Pakco")
RHODES FOOD GROUP HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 2012/074392/06)
JSE share code: RFG
ISIN: ZAE000191979
("RFG" or "the Company")
ACQUISITION OF THE SHARE EQUITY AND CLAIMS OF PAKCO PROPRIETARY LIMITED ("PAKCO")
Introduction and overview
Shareholders are advised that the Company and the Company's wholly owned subsidiary, Rhodes Food
Group Proprietary Limited ("Rhodes Food"), Pakco and the shareholder of Pakco have entered into an
agreement ("Agreement") dated 30 September 2016 in terms of which Rhodes Food will acquire 100% of
the issued share capital of Pakco from its shareholder ("Seller") as well as all of the shareholder’s loan
claims against Pakco (the "Acquisition").
Description of the Pakco business
Pakco, based in Durban, is a manufacturer of spices, condiments, instant meals and complementary
products. Pakco manufactures, packs and distributes dry packed, bottled and canned foods under its own
brands and private label.
Pakco has several strong, well-established brands including:
- Bisto, Southern Coating and Buffalo in the dry packed meal solutions category;
- Trotters and Hinds in the dry packed dessert category;
- Gold Dish in the canned meal category; and
- Pakco spices and pickles.
The products are stocked by major retailers, wholesalers and independent stores in South Africa and
exported to eight neighbouring African states.
Rationale for the Acquisition
The board of directors of RFG believes the Acquisition presents an attractive investment opportunity
which is aligned with Rhodes Food’s strategy of expanding its business operations through value
accretive acquisitions. This Acquisition will enhance Rhodes Food’s position in the canned foods as well
as the salads and pickles categories, while the dry-packed products offer the opportunity to enter into a
new category in keeping with its strategy of lateral extensions into adjacent categories. The board of
directors of RFG believes that Pakco owns valuable brands which are well known and used by
consumers. Rhodes Food is well positioned to improve Pakco’s volumes and profitability in the medium
term.
Purchase consideration and effective date
The purchase consideration payable by Rhodes Food to the Seller is R200 000 000 (two hundred million
rand). The purchase consideration will be settled by way of the issue and allotment to the Seller of
ordinary shares in the share capital of RFG (“Consideration Shares”), or in certain circumstances to be
settled partly in cash. The effective date of the Acquisition is 1 January 2017.
Conditions precedent
The Acquisition is subject to the following conditions precedent:
(1) by no later than 5 December 2016, delivery by Rhodes Food to the Seller of a certified
copy of a resolution of the board of directors of Rhodes Food authorising the Acquisition
and the conclusion of the Agreement;
(2) by no later than 5 December 2016, delivery by RFG to the Seller of a certified copy of a
resolution of the board of directors of RFG authorising:
(a) the conclusion of the Agreement by RFG; and
(b) the issue of the Consideration Shares to the Seller on the terms set out in the
Agreement, including confirmation of the adequacy of the purchase consideration
as consideration for the Consideration Shares in accordance with the provisions
of section 40 of the Companies Act, No. 71 of 2008;
(3) by no later than 5 December 2016, delivery by the Seller to Rhodes Food of a certified
copy of a resolution of the board of directors of the Seller authorising the Acquisition and
the conclusion of the Agreement;
(4) by no later than 5 December 2016, delivery by the Seller to Rhodes Food of a certified
copy of a special resolution of the shareholders of the Seller authorising the Acquisition
and the conclusion of the Agreement in compliance with the provisions of section 112 of
the Companies Act, No. 71 of 2008;
(5) by no later than 30 November 2016, a lease agreement between Pakco and Javel
Trading Proprietary Limited, in terms of which Pakco will lease the premises from which it
conducts its business, shall have been duly concluded by the parties thereto, and shall
have become unconditional in accordance with its terms, save for any condition relating
to the coming into force and effect of the Agreement;
(6) by no later than 5 December 2016, Rhodes Food notifies the Seller in writing that it is
satisfied with the result of a due diligence investigation, in its sole and absolute discretion;
(7) by no later than 31 March 2017, the Acquisition is approved in terms of the Competition
Act, No.89 of 1998 without any condition, or on terms and conditions acceptable to the
Seller and Rhodes Food;
(8) by no later than 31 December 2016, insofar as it may be necessary for Rhodes Food or
RFG to obtain approval in terms of the listings requirements of the JSE Limited (“JSE
Listings Requirements”) for the Acquisition and/or the implementation thereof, the
approval of the JSE Limited is obtained;
(9) by no later than 30 November 2016, to the extent that the subject matter of the
Acquisition or the assets of Pakco are encumbered in favour of the funder, the Seller
obtaining and delivering to Rhodes Food an irrevocable written undertaking from a funder
that the funder will upon settlement of the purchase consideration in accordance with the
provisions of the Agreement:
(a) immediately cancel all and any notarial bonds that the funder currently has
registered over any of the assets owned by Pakco; and
(b) immediately release the subject matter of the Acquisition of all and any
encumbrances in favour of the funder.
The value of and profits attributable to the business of Pakco
Pakco’s net asset value at the end of its last financial year (31 December 2015) was R83 million. EBITDA
for the financial year ended 31 December 2015 amounted to R9.5 million on revenue of R221.5 million.
Schedule 10 of the JSE Listings Requirements
To the extent necessary, the board of RFG shall, as soon as possible after the effective date, procure
that the memorandum of incorporation of Pakco and its subsidiaries are amended to ensure RFG’s
continued compliance with its obligations in terms of the JSE Listings Requirements.
Categorisation of the Acquisition
The Acquisition does not constitute a categorised transaction in terms of the JSE Listings Requirements
and this announcement is therefore made on a voluntary basis.
Groot Drakenstein
4 October 2016
Sponsor
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
Legal Advisor
Edward Nathan Sonnenbergs Incorporated
Date: 04/10/2016 07:08:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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