| Fri 9 Dec 2011, 13:30 | | SKJ - Sekunjalo Investments Limited - Sekunjalo co |
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SKJ
SKJ
SKJ - Sekunjalo Investments Limited - Sekunjalo concludes investment in
Pioneer Foods Phase Ii Broad-Based Black Economic Empowerment Transaction
Sekunjalo Investments Limited
(Incorporated in the Republic of South Africa)
(Registration number 1996/006093/06)
Share code: SKJ
ISIN: ZAE000017893
("Sekunjalo" or "the Company")
SEKUNJALO CONCLUDES INVESTMENT IN PIONEER FOODS PHASE II BROAD-BASED BLACK
ECONOMIC EMPOWERMENT TRANSACTION
1. INTRODUCTION
1.1 Sekunjalo is pleased to advise shareholders of its inclusion as a
strategic Broad-based Black Economic Empowerment ("B-BBEE") partner in
the second phase of Pioneer Food Group ("Pioneer Foods") B-BBEE
strategy to introduce direct black ownership to Pioneer Foods
("Pioneer Foods Phase II B-BBEE Transaction"). The Pioneer Foods Phase
II B-BBEE Transaction is structured to be broad-based, including an
Education and Community Trust, black members of the board of the
Company and strategic B-BBEE partners, which includes Sekunjalo ("the
Transaction").
1.2 The Transaction is subject to the fulfilment, inter alia, of the
conditions precedent set out in paragraph 7 below, to facilitate a
subscription for shares in the issued share capital of Pioneer Foods
by black participants ("the Pioneer Foods Proposed Phase II B-BBEE
Specific Issue"). The Pioneer Foods Proposed Phase II B-BBEE Specific
Issue will involve the issue of shares equivalent to 13.55% of Pioneer
Foods` ordinary issued share capital post-implementation of the
Pioneer Foods Proposed Phase II B-BBEE Specific Issue ("enlarged
issued share capital") to all the black participants.
2. THE PIONEER FOODS PROPOSED PHASE II B-BBEE SPECIFIC ISSUE
2.1 The Pioneer Foods Proposed Phase II B-BBEE Specific Issue is based on
a 30 day volume weighted average share price ("VWAP") of R60.10 per
Pioneer Foods ordinary share ("Ordinary Share") as at the close of
trading on Friday, 02 December 2011 ("indicative market price"). The
effective market price for the Transaction will be determined based on
the 30 day VWAP price of Pioneer Foods Ordinary Shares on a future
date ("effective market price"). The specific issue by Pioneer Foods
to Sekunjalo will be made at a 5% discount to the effective market
price (The Specific Issue").
2.2 In terms of the Pioneer Foods Proposed Phase II B-BBEE Specific Issue,
Sekunjalo will hold, through a ring-fenced SPV ("the Sekunjalo SPV")
1,589,998 Pioneer Foods Ordinary Shares, being 0.75% of Pioneer Foods`
enlarged issued share capital. The approximate total combined
subscription price payable by Sekunjalo in terms of the Specific Issue
will amount to approximately R90,8 million based on the indicative
market price. The Specific Issue to Sekunjalo takes place at a
discount of 5%, effectively a discount of R4.8 million.
3. RATIONALE FOR THE TRANSACTION
Sekunjalo is firmly established as the pre-eminent black empowerment
group and is continuously looking for strategic opportunities. This
relationship with Pioneer Foods is in line with the company`s strategy
to become a partner of choice. Sekunjalo is in the food business
through Premier Fishing SA (Pty) Ltd and this transaction compliments
our portfolio in the food sector. We believe that the food sector will
have significant growth over the medium to long term in South Africa
and the rest of Africa. This further enhances our strategic thinking
around building a diversified investment holding company.
4. BUSINESS OF PIONEER FOODS
4.1 Operating in the food and beverages business sectors, Pioneer Foods`
core business is the production and distribution of a diverse range of
food, beverages and related products. Focused on products for both
human and animal consumption, Pioneer Foods is a significant player in
these industries in southern Africa.
4.2 Employing more than 11 000 permanent employees, the Group has a
leadership position in the staple foods segment with value-added
quality products, and a diversified and expanding portfolio of premium
household brands, across all market segments of the LSM categories.
4.3 The business operates through its four main divisions:
4.3.1 Sasko manufactures a range of affordable grain-based staple
foods. In addition to wheaten and maize products, it also trades
in rice, beans, lentils and dried vegetables and has one of South
Africa`s largest bakery operations with bakeries and depots
located throughout the country;
4.3.2 Bokomo Foods produce some of South Africa`s best-known breakfast
cereals, rusks, biscuits, cake mixes, baking aids, instant mash
potato, as well as dried fruit products, nuts, spreads,
dehydrated vegetables and processed salads;
4.3.3 The Agri business produces poultry and animal feeds, chickens,
eggs, processed egg and processed chicken-based products; and
4.3.4 The Ceres Beverage Company is one of the largest producers of
fruit juices, carbonated soft drinks (including Pepsi, 7-Up,
Mirinda and Mountain Dew) and fruit concentrate mixtures.
4.4 Within the Group there are a number of international joint ventures,
the most notable of which is a 49.9% stake in Heinz Foods SA. The
joint venture is between Pioneer Foods and HJ Heinz Company of the USA
and operates in the condiments and convenient food markets` producing
tomato sauces and ketchup, frozen foods, seafood tinned products,
tinned food, instant meals and noodles. Bowman Ingredients South
Africa is a 50% joint venture with Jas Bowman & Son in the UK`
supplying food ingredients to South Africa`s large food producers.
4.5 Pioneer Foods is committed to and accountable for ethical conduct
anchored in the core values of the Group and strongly subscribes to
the principles of good corporate governance. The group strives to be
an employer of choice and is committed to attraction, motivation,
development and retention of talent.
5. DETAILS OF THE PIONEER FOODS PROPOSED PHASE II B-BBEE SPECIFIC ISSUE
5.1 The Pioneer Foods Proposed Phase II B-BBEE Specific Issue will be
implemented through a specific issue of Ordinary Shares for cash by
Pioneer Foods.
5.2 The Specific Issue will be issued by Pioneer Foods in terms of Pioneer
Foods` articles of association (now referred to as the memorandum of
incorporation in terms of the Companies Act 71 of 2008, as amended
("MOI")) and on the terms and conditions and with the rights and
restrictions contained in the relevant subscription agreements ("the
Subscription Agreements").
5.3 The Subscription Agreements provide for a lock-in period of 7 years,
during which time Sekunjalo will not be entitled to dispose of the
Pioneer Foods Ordinary Shares subscribed to in terms of the Pioneer
Foods Proposed Phase II B-BBEE Specific Issue.
5.4 The approximate total combined subscription price payable by Sekunjalo
in terms of the Specific Issue will amount to approximately R90,8
million based on the indicative market price. Sekunjalo will be
required to capitalise the Sekunjalo SPV with 55% of the subscription
price payable. The Sekunjalo SPV will accordingly be capitalised by a
total amount of R49,9 million consisting of 10% of Sekunjalo`s own
funding and 45% third party funding from Rand Merchant Bank ("RMB") in
the form of an A Preference Share subscription ("A Preference Share
Subscription"). The A Preference Shares will be subscribed for on
terms and conditions standard for transactions of this nature
including the following terms:
5.4.1 A Preference Share dividends will accrue at an annual rate
amounting to 75% of the prevailing prime interest rate on the
outstanding principal A Preference Share Subscription amount and
outstanding preference share dividends.
5.4.2 The A Preference Share Subscription will be structured as a
capital bullet facility with the dividends on the A Preference
Shares being serviced from dividends received by the Sekunjalo
SPV in respect of the Pioneer Foods Ordinary Shares issued under
the Pioneer Foods Proposed Phase II B-BBEE Specific Issue.
5.5 Pioneer Foods will subscribe for B Preference Shares in the Sekunjalo
SPV for the balance of the subscription price payable by Sekunjalo
amounting in total to R40,9 million ("the B Preference Shares") or 45%
of the approximate combined total subscription price. The B Preference
Shares will be subscribed for on the following terms and conditions:
5.5.1 B Preference Share dividends will accrue at an annual rate
amounting to 90% of the prevailing prime interest rate on the
outstanding principal B Preference Share subscription amount and
outstanding preference share dividends ("the Preference Shares
Balance").
5.5.2 B Preference Share dividends will be rolled up as the dividends
received by the Sekunjalo SPV on the Pioneer Foods Ordinary
Shares issued to the Sekunjalo SPV under the Pioneer Foods
Proposed Phase II B-BBEE Specific Issue, will be utilised against
the RMB A Preference Share Subscription plus rolled up A
Preference Share dividends first.
5.5.3 It is proposed that Pioneer Foods provide a guarantee to RMB,
with a view to facilitating the provision of the RMB A Preference
Share Subscription to the Sekunjalo SPV.
6. EFFECTIVE DATE
The Transaction will become effective on the date all conditions
precedent to the Transaction are fulfilled, as set out in paragraph 7
below.
7. CONDITIONS PRECEDENT TO THE PIONEER FOODS BEE SPECIFIC ISSUE
7.1 The Pioneer Foods Proposed Phase II B-BBEE Specific Issue will be
subject to the conditions precedent inter alia as set out below:
7.1.1 The shareholders of Pioneer Foods in a general meeting pass the
ordinary and special resolutions required to approve and
implement the Pioneer Foods Proposed Phase II B-BBEE Specific
Issue;
7.1.2 The successful completion of a due diligence investigation by
Pioneer Foods into Sekunjalo and the Sekunjalo SPV;
7.1.3 Pioneer Foods confirming that it is satisfied with the BEE rating
placed on the Pioneer Foods Proposed Phase II B-BBEE Transaction
by a verification agency
7.1.4 All transaction agreements being entered into and becoming
unconditional; and
7.1.5 The unconditional approval to the extent necessary, by all
regulatory authorities having jurisdiction in respect of the
Pioneer Foods Proposed BEE Specific Issue, including the JSE, be
obtained or, is such approvals are conditional, on such
conditions as are acceptable to the parties, acting reasonably,
affected thereby.
8. CLASSIFICATION OF THE TRANSACTION AND RELATED MATTERS
This announcement is a voluntary announcement to shareholders in terms
of the Listings Requirements of the JSE Limited as the Transaction for
categorisation purposes is less than 5% of Sekunjalo`s market
capitalisation.
9. UPDATE ON CAUTIONARY ANNOUNCEMENT
Shareholders are referred to the cautionary announcement dated 30
November 2011 and are advised that the Sekunjalo is still in
negotiations other than the Pioneer Foods transaction detailed in this
announcement, which if successfully concluded may have a material
effect on the price of the Company`s securities. Accordingly
shareholders are advised to continue exercising caution when dealing
in the Company`s securities until a full announcement is made.
Cape Town
9 December 2011
Sponsor
PSG Capital (Pty) Limited
Date: 09/12/2011 13:05:01 Produced by the JSE SENS Department.
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