| Tue 9 Mar 2004, 18:07 | | Disposal by AFGRI Limited ("AFGRI") of the 50% equ |
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Disposal by AFGRI Limited ("AFGRI") of the 50% equity interest in Earlybird Farm
(Proprietary) Limited ("Earlybird") to Astral Foods Limited ("Astral")
AFGRI LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1995/004030/06)
ISIN: ZAE000040549 JSE Code: AFR
("AFGRI" or the "Company")
Disposal by AFGRI Limited ("AFGRI") of the 50% equity interest in Earlybird Farm
(Proprietary) Limited ("Earlybird") to Astral Foods Limited ("Astral")
1. Introduction
Further to the cautionary announcement dated 27 February 2004, the directors of
AFGRI (the "directors") are pleased to announce that AFGRI has reached an
agreement, subject to the conditions precedent set out in paragraph 4 below, in
terms of which AFGRI Operations Limited ("AFGRI Operations"), a wholly-owned
subsidiary of AFGRI, will sell its 50% interest in the issued share capital of
Earlybird ("the disposal") to Astral.
2. The Disposal
2.1 Rationale
AFGRI Operations currently holds 50% of the issued share capital of Earlybird
and controls it jointly with Astral. Astral is a direct competitor to AFGRI and
this has resulted in a conflict of interest between the parties, which the
directors do not believe is in the best interests of either Earlybird or AFGRI.
The boards of directors of AFGRI and AFGRI Operations are of the opinion that
the disposal would be strategically beneficial to AFGRI as, notwithstanding the
disposal, a ten year feed procurement contract for 50% of the current feed
requirements of Earlybird will be entered into between Earlybird and the animal
feed division of AFGRI Operations in line with the current agreement in place.
The broiler business is cyclical but is currently in a buoyant phase and the
directors believe that it is the correct time to sell. In future AFGRI will
evaluate a possible re-entry into the broiler business, if the correct
opportunity presents itself.
In addition, the cash consideration will be available to AFGRI for future
investments and strategic business alliances that will produce an improved
return on investment more in line with the requirements of the Company. This
would include strategically complimentary acquisitions such as the acquisition
of Natal Landbou Kooperasie Beperk (Natalagri) for a net cash consideration of
R30,7 million as announced on SENS on 19 December 2003 and as more fully
disclosed in the Natalagri circular to its members dated 21 January 2004.
2.2 The business of Earlybird
Earlybird"s activities, based in Gauteng and Mpumalanga, include parent rearing,
laying, hatcheries, broiler production, processing, sales and distribution of
fresh and frozen whole birds and portions. Earlybird"s brands include the well
known Goldi and Festive labels.
2.3 Proceeds
The disposal will have a cash consideration of R250 million (the "proceeds").
Interest on the proceeds will accrue to AFGRI at a rate equal to Nedbank
Limited"s overnight call rate from time to time from 1 March 2004 to the date on
which the disposal becomes unconditional.
In addition, an interim cash dividend for the period ended 29 February 2004 will
be declared by Earlybird and AFGRI"s share, in the amount of R25 million, will
be paid to AFGRI after 1 March 2004.
The effective date of the disposal, subject to the disposal becoming
unconditional, will be 1 March 2004.
2.4 Financial effects
Impact on financial results for the year ended 29 February 2004.
As a result of the effective date being 1 March 2004, the disposal will have no
effect on the expected earnings for the financial year ended 29 February 2004.
Indicative financial effects (only the reduction in interest expense recognised)
The disposal would have had the following effect on earnings per share ("EPS"),
headline EPS, net asset value ("NAV") and net tangible asset value ("NTAV") per
share for the interim period ended 31 August 2003, based on the assumptions set
out below:
Before the After the Change
disposal(1) disposal (%)
(cents) (2,3)
(cents)
EPS 25,8 21,6 (16.3)
Headline EPS 30,1 25,9 (14.0)
NAV per share 382,9 425,0 11.0
NTAV per 368,4 410,5 11.4
share
1. Based on AFGRI"s reviewed financial results for the interim period ended 31
August 2003. The weighted average number of shares in issue and the number of
shares in issue for purposes of the calculations is 326 786 493 and 326 001 824,
respectively.
2. Based on the assumption that the disposal was implemented on 1 March 2003
for the purpose of calculating EPS and headline EPS, and on 31 August 2003 for
the purpose of calculating NAV and NTAV.
3. The only impact on the income statement considered for the purpose of these
financial effect calculations was the reduction in interest expense as a result
of lower borrowings following the application of the proceeds against borrowings
and not invested in new businesses. The average interest rate on debt is based
on ABSA"s prime interest rate.
4. CONDITIONS PRECEDENT
The implementation of the disposal is subject to the fulfillment of the
following conditions precedent:
(a) the entering into of a final sale agreement to be approved by the Boards
of AFGRI and Astral;
(b) the necessary approvals being obtained from the JSE Securities Exchange
South Africa;
(c) the acquisition by Astral being unconditionally approved, alternatively
approved subject to conditions acceptable to Astral, by the Competition
Authorities of South Africa; and
(d) the cancellation of all restraints contained in the Shareholders Agreement
between AFGRI and Astral.
Johannesburg
9 March 2004
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