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CFO
CFO
CFO - Country Foods - The Acquisition Of The "The Mediterranean" And Renewal
Of Cautionary Announcement
COUNTRY FOODS LIMITED
(formerly Africa`s Best 346 Limited)
(Incorporated in the Republic of South Africa)
(Registration number: 2005/018743/06)
(JSE code: CFO & ISIN: ZAE000105052)
("Country Foods" or "the company")
THE ACQUISITION OF THE "THE MEDITERRANEAN" AND RENEWAL OF CAUTIONARY
ANNOUNCEMENT
1. INTRODUCTION
Shareholders are advised that Country Foods has recently acquired a 70% stake in
its newly formed subsidiary Pavati Trading 83 (Pty) Limited ("Pavati"), which
subsidiary in turn, wholly owns the newly formed subsidiaries, Central Lake
Trading 360 (Pty) Limited ("Central Lake") and City Square Trading 984 (Pty)
Limited ("City Square").
The Pavati and Central Lake subsidiaries("the Subsidiaries"), have entered into
agreements with Mediterranean Fish Centre (Pty) Limited ("Mediterranean Fish
Centre") and The Mediterranean Fourways Mall (Pty) Limited ("the sellers") in
terms of which Country Foods has acquired the businesses of the sellers as going
concerns,(including certain assets and liabilities) ("the Businesses"), with
effect from 1 March 2008, and subject to the fulfillment of the conditions
precedent set out in paragraph 5 below.
Country Foods has furthermore, through its City Square subsidiary, entered into
an agreement with Kenwyn Properties (Pty) Limited ("Kenwyn Properties") to
acquire the rental enterprise consisting of the property leased to Mediterranean
Fish Centre, as a going concern (collectively "the Acquisitions" or "The
Mediterranean").
The existing shareholders of the Sellers will own 30% in Pavati.
2. NATURE OF THE BUSINESS OF "THE MEDITERRANEAN"
The business known as "The Mediterranean" was established in the late sixties by
the Mendon?a family. "The Mediterranean" is a historical shopping destination
for Mediterranean specialities with established clientele among Portuguese,
Italian, Spanish, Greek and the ever growing Chinese Communities. "The
Mediterranean" also has strong ties with its wholesale clients in former
Portuguese speaking neighbouring countries such as Angola and Mozambique.
"The Mediterranean" comprises a wholesale and retail outlet situated in a 3000
square meter commercial premises in Malvern as well as a "franchise concept"
retail outlet which was opened in Fourways View shopping centre during early
2005.
Core products sold are speciality fish (frozen, fresh and salted), meat and meat
products, imported specialities such as oils, pastas etc and own brand dry
product such as legumes, spices, etc.
3. RATIONALE FOR THE ACQUISITIONS
"The Mediterranean" is a well-established wholesale distribution and retail
business with a well-developed client base operating in the niche, high-quality,
specialty food industry. Country Foods believes that it is acquiring the
businesses at well below the cost of establishing a similar operation.
Country Foods plans to expand and consolidate the wholesale operations of "The
Mediterranean" into a comprehensive and sustainable regional wholesaler with a
number of distribution centers and to develop "The Mediterranean" name and
trademark into a range of branded specialty products to be distributed
countrywide to the food services and retail industries.
In doing so, Country Foods will utilise the spare production capacity in
existing group assets to process and pack products at low cost and under Hazard
Analysis Critical Control Point (HACCP) certified conditions as well as
decreasing its exposure to the seasonal nature of the existing group operations.
Country Foods also plans to develop a franchise concept based on the
"Mediterranean Fourways" into a well-known food franchise trademark in the mould
of the well known international brand "Whole Foods".
Country Foods will also be able to expand distribution of the existing product
ranges of the Country Foods Group to "The Mediterranean" business and through
its network. The establishment of a strong wholesale speciality fish
distribution operation fits well within the ambit and strategy of Country Foods
to create a much larger product and brand base for the group.
4. CONSIDERATION
The consideration payable for the Acquisitions is the aggregate of the sum of R1
for each of the two businesses, plus the amount of the net assumed liabilities
in respect of each of the businesses as at the effective date, which assumed net
liabilities are expected to be approximately R4.8 million. The consideration of
R1 for each of the businesses will be paid on the closing date of the
Acquisitions, and the assumed liabilities will be assumed by the relevant
subsidiaries of Country Foods and settled in the normal course of business.
In terms of the shareholders agreement for Pavati, Country Foods has the option
to acquire the remaining 30% (or any portion thereof) of the shareholding in
Pavati between March 2011 and May 2014 at a price equal to 5 times the relevant
adjusted, consolidated after tax profit of Pavati at the time of the exercise of
the option. The minority shareholders in this company have the option to sell
their shares (or any portion thereof) to Country Foods on the same terms.
The consideration payable for the rental enterprise to be acquired from Kenwyn
Properties is the aggregate of the sum of R3 million to be settled by way of
releasing the previous owners from bank sureties.
5. CONDITIONS PRECEDENT
The Acquisitions are subject to, inter alia, the following conditions precedent:
- approval by the shareholders of the Sellers by no later than 26 March 2008;
- the satisfactory conclusion of a detailed due diligence of the Businesses by 4
April 2008;
- approval, to the extent required, of the shareholders of Country Foods, by 30
April 2008; and
- regulatory approvals, including, without limitation, the JSE Limited,
Securities Regulation Panel and Competition Commission, to the extent required.
6. UNAUDITED PRO FORMA FINANCIAL EFFECTS OF THE ACQUISITIONS
The pro forma financial effects of the Acquisitions will be disclosed in due
course, together with the final details of the Acquisitions.
7. RENEWAL OF CAUTIONARY ANNOUNCEMENT
Shareholders are referred to the cautionary released on SENS on Monday 11
February 2008 and are advised to continue exercising caution when dealing in
their securities until such time as a final announcement is made with regard to
the Acquisitions.
Johannesburg
27 March 2008
Designated adviser
Vunani Corporate Finance
Date: 27/03/2008 14:33:01 Produced by the JSE SENS Department.
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