| Wed 24 Oct 2001, 0:00 | | Afribrand Disposal Announcement And Further Cautio |
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Afribrand Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 1997/008992/06)
("Afribrand" or "the company" or "the group")
Share code: ABR
ISIN code: ZABR 000012969
Financial results
In response to the article published in the press on 16 October 2001, the
financial results to be published on 31 October 2001 will reflect
substantial losses being incurred by Afribrand over the past few years. This
has led to a major restructuring programme being undertaken by the group.
Most of the decentralised businesses are showing improved trading results.
The debt continues to exist at a high level.
Disposal announcement
Further to the restructuring initiatives announced on 22 August 2001 and
26 September 2001, Afribrand's board of directors announces that Afribrand
(Pty) Ltd, a wholly owned subsidiary of Afribrand, has entered into a sale
of business agreement ("the agreement") with Ibiza Trading 4 (Pty) Ltd
("Ibiza"). The agreement provides, subject to the fulfilment of certain
suspensive conditions, for Ibiza to acquire the major part of the business
of the Armato Snacks Division ("Amato Snacks") of Afribrand (Pty) Ltd, as a
going concern, pursuant to a management buy-out with effect from 4 December
2001 ("the effective date").
Nature of the business of Armato Snacks
The business of Armato Snacks being disposed of comprises the manufacture
and distribution of snack foods. The assets being disposed of in terms of
the agreement include, but are not limited to, the contracts, debts, fixed
assets, goodwill, intellectual property, liabilities, licenses, proprietary
information and the inventory.
Rationale for the transaction
The disposal forms part of the restructuring initiatives to dispose of
unprofitable and non-core businesses. The proceeds of the disposal will be
used to reduce the total debt of the group.
Suspensive conditions
The agreement with Ibiza is subject, inter alia, to the fulfilment of the
following suspensive conditions:
- on or before 3 December 2001, the written approval of the JSE being
obtained, insofar as the same may be necessary for the sale of business in
terms of the agreement; and to a circular convening a special general
meeting of Afribrand to approve of the transaction contemplated in the
agreement;
- on or before 3 December 2001, Afribrand convening a special general
meeting of its shareholders and such shareholders voting in favour of all
necessary resolutions required for the approval and implementation of the
transaction contemplated in the agreement;
- on or before 3 December 2001, a shareholders agreement having been
concluded in writing between Afribrand (Pty) Ltd, Ibiza, Mr Willem de
Clercq, Mr Neil Hubbard and Mr Hilton Cohen in relation to the shareholding
held or to be held by each of the parties in Ibiza, and this shareholder's
agreement having become unconditional according to the terms thereof;
- on or before 4 November 2001, Ibiza having obtained the requisite funding
in respect of such part of the purchase price as does not exceed R13 million
on terms and conditions reasonably acceptable to Ibiza, as notified by Ibiza
in writing to Afribrand (Pty) Ltd;
- on or before 4 November 2001, the bankers of the Afribrand Group having
given their written approval to the transaction contemplated in the
agreement; and
- on or before 4 November 2001, the landlord of the existing lease held by
Afribrand (Pty) Ltd in respect of certain premises having given its written
consent to the assignment and delegation of the rights and obligations under
the lease by Afribrand (Pty) Ltd to Ibiza; and having unconditionally
released Afribrand from the deed of suretyship given by it in respect of the
obligations of Afribrand (Pty) Ltd under the lease.
Consideration
In terms of the Armato Snacks disposal agreement, Afribrand (Pty) Ltd will
dispose of Armato Snacks, pursuant to a management buy-out, for a total
consideration of R17.5 million. This is based on an expected net value of
R4.5 million for the aggregate of debtors, liabilities and inventory as at 4
December 2001 and R13 million for the fixed assets. An audit will be carried
out immediately following 4 December 2001 and if that expected net value is
exceeded or there is a shortfall, the purchase price stands to be adjusted
accordingly on a "Rand for Rand" basis. Such adjustment will take place
against the cash payment to be made and not against the issue of shares in
Ibiza. The purchase consideration will be settled as follows:
- the payment of a cash consideration of R8.5 million on the effective date;
- the payment of a cash consideration of R4.5 million, immediately following
the completion of the audit referred to above. This amount will accrue
interest at the prime rate between 4 December 2001 and the date of payment
thereof, such interest is to be paid simultaneously with the capital amount;
- the balance of R4.5 million will be discharged on the effective date by
the issue and allotment of so many shares, credited as fully paid up, in the
share capital of Ibiza to Afribrand (Pty) Ltd, or its nominee, as will,
immediately following such issue constitute no less than 49% of the entire
issued ordinary share capital of Ibiza. Afribrand (Pty) Ltd shall not have a
controlling interest in Ibiza and intends to equity account its interest in
Ibiza in the future.
Financial effects
Based on the interim financial information of Afribrand for the six months
ended 31 December 2000, the pro-forma financial effects of the disposal of
Armato Snacks on Afribrand's net asset value per share, loss per share and
headline loss per share are set out below. This pro forma financial
information has been prepared for illustrative purposes only and because of
its nature may not give a true picture of Afribrand's financial position and
results of operations.
Before After Percentage
disposal disposal change
(cents) (cents) %
Net asset value per 26.5 (1) 24.8 (2) (6.4%)
share
Loss per share (14.5) (1) (16.0) (3) (10.3%)
Headline loss per (11.4) (1) (11.4) (4) 0.0%
share
1. The "before disposal" pro-forma financial information is based on the
published interim results of Afribrand for the six months ended 31 December
2000;
2. The "after disposal" net asset value per share has been calculated on the
assumption that the disposal took place as at 31 December 2000 and after
taking into account the loss on the disposal of R7.6 million which was based
on the net asset value of Armato Snacks of R25.1 million at that date and
the total consideration of R17.5 million comprising cash of R13 million and
the investment in Ibiza of R4.5 million. The "after disposal" net asset
value per share was determined using 454 954 882 ordinary shares in issue at
31 December 2000.
3. The "after disposal" loss per share has been calculated on the assumption
that the disposal took place as at 1 July 2000. Earnings per share have
been adjusted to exclude the results of Armato Snacks for the 6 months ended
31 December 2000 and to take into account the resulting loss on the
disposal, the reduction in the interest charge, calculated at the prime
overdraft rate of 14.5%, which would have resulted, on the assumption that
the cash consideration of R13 million was received on 1 July 2000 and to
include the equity accounted income of Ibiza;
4. The "after disposal" headline earnings per share have been adjusted for
the effect of the loss on the disposal and other exceptional items relating
to Armato Snacks; and
5. The "after disposal" loss per share and headline loss per share were
arrived at using the weighted average number of Afribrand ordinary shares in
issue (451 724 965) for the six months ended 31 December 2000.
Circular
As the Armato Snacks disposal is classified as a Category 1 transaction in
terms of the JSE Listings Requirements, a circular containing details of and
seeking shareholder approval for the disposal will follow in due course.
This circular will also contain details of and seek shareholder approval for
the disposal of the Golden Wheat Division ("Golden Wheat") by Afribrand
announced on 22 August 2001.
Further to the Golden Wheat disposal announcement
Further to the announcement dated 22 August 2001 regarding the disposal by
Afribrand of the business of Golden Wheat, as a going concern, shareholders
are advised that an addendum to the original disposal agreement has been
concluded. In terms of this addendum the balance of the purchase
consideration, amounting to R5.2 million, which has been paid into a trust
account, will be held in such trust account until the completion date, now
estimated to be 4 February 2002.
In the event of a breach of the warranties, contained in the addendum, prior
to the completion date, the purchaser, being Cannon Gate Trading (Pty) Ltd
may, at its discretion, either void the agreement or claim a reduction in
the purchase consideration.
Further Cautionary Notice
Shareholders are advised that the company is involved in further
negotiations to further effect the restructuring initiatives, which if
successfully concluded, may have a material effect on the price at which the
company's shares trade on the JSE.
Shareholders are accordingly advised to continue to exercise caution in
dealing with their Afribrand shares until a further announcement in this
regard is made.
Johannesburg
24 October 2001
Corporate Adviser and Sponsor Legal adviser
KPMG Prinsloo, Tindle & Andropoulos Inc
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