| Thu 16 Sep 2004, 17:14 | | Offer By Afgri Operations Limited To Acquire Certa |
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Afgri Limited - Offer By Afgri Operations Limited To Acquire Certain
Specified
Assets And Specified Liabilities Of Boland Agri Beherend
Limited As A Going Concern
AFGRI LIMITED
(Incorporated in the Republic of South Africa)
Registration number: 1995/004030/06
Share Code: AFR
ISIN : ZAE000040549
OFFER BY AFGRI OPERATIONS LIMITED (`AFGRI Operations`) TO ACQUIRE CERTAIN
SPECIFIED ASSETS AND SPECIFIED LIABILITIES OF BOLAND AGRI BEHEREND LIMITED
(`Boland Agri`) AS A GOING CONCERN
1. INTRODUCTION
Quaestor Capital (Pty) Limited (`Quaestor Capital`) is authorised to
announce that AFGRI Operations, a wholly owned subsidiary of AFGRI
Limited (`AFGRI`), which is listed on the JSE Securities Exchange South
Africa (`JSE`), has offered to acquire certain specified assets and
specified liabilities of Boland Agri as a going concern (`the Specified
Assets and Liabilities`) pursuant to the provisions of section 228 of
the Companies Act (Act 61 of 1973, as amended) (`the Companies Act`)
(`the Offer`). The Offer is subject to the suspensive conditions set
out in 2.2 below.
2. TERMS AND CONDITIONS OF THE OFFER
The full terms and conditions of the Offer will be contained in a
circular to be sent to Boland Agri shareholders within the period
stipulated in 12.4.
2.1 Salient terms and conditions
The salient terms and conditions of the Offer are:
- the purchase consideration (`the Purchase Consideration`)
will be the lesser of the following amounts:
- an amount of R178 585 172; or
- the aggregate value of the Specified Assets and Liabilities
(refer 2.4) and will be paid in cash to Boland Agri on the
completion date (refer below) in the manner set out in 2.3;
- the effective date of the transaction will be 1 May 2004
(`the Effective Date`);
- the transaction will be implemented within 5 business days
from the date of fulfilment of all the suspensive conditions
(`the Completion Date`);
- in calculating the Purchase Consideration, AFGRI Operations
has taken into consideration the time that has lapsed between
the Effective Date and 30 September 2004; and
- the Purchase Consideration will attract interest at Boland
Agri`s commercial bankers` daily call deposit interest rate
(nominal annual, compounded monthly in arrears) from 1
October 2004 until the Completion Date.
2.2 Suspensive conditions
Since the Offer is being made without the benefit of a due
diligence investigation having been conducted, AFGRI Operations
reserves the right to amend the terms and conditions of the Offer
or to withdraw the Offer should AFGRI Operations at any time
before posting of the circular referred to in 12.4, discover any
material legal or contractual impediment which prevents AFGRI
Operations from acquiring all the specified assets identified in
the Agreement.
Implementation of the Offer is subject to the fulfilment of the
following suspensive conditions:
- Boland Agri`s shareholders approving the terms and conditions
of the Offer (as contained in an asset sale agreement, to be
entered into between AFGRI Operations and Boland Agri) (`the
Agreement`) by the passing of a resolution pursuant to
section 228 of the Companies Act on or before 15 October 2004
(`Ordinary Resolution Number 1`);
- Boland Agri`s shareholders recommending to the directors of
Boland Agri (the `Boland Agri Board`) that a dividend, equal
to the Purchase Consideration, but after repayment by Boland
Agri to its shareholders of the face value of the shareholder
loans (refer to 2.4), as well as any applicable taxes:
- be declared by the Boland Agri Board once the Agreement
becomes unconditional; and
- be paid to the shareholders of Boland Agri upon
implementation of the Agreement, subject to the
limitations imposed by the Agreement,
- by the passing of a resolution to that effect on or
before 15 October 2004 (`Ordinary Resolution Number 2`);
and
- the requisite statutory and regulatory approvals being
obtained, including the approval of the relevant
Competition Authorities on or before 28 February 2005.
The dates for fulfilment of the suspensive conditions are
stipulated for the benefit of AFGRI Operations, who may extend any
such date by notice in writing to Boland Agri, provided it is not
extended beyond 30 April 2005. AFGRI Operations may waive
fulfilment of Ordinary Resolution Number 2 by notice in writing to
Boland Agri.
2.3 Payment of the Purchase Consideration
The Purchase Consideration (inclusive of interest thereon,
calculated on the basis set out in 2.1) will be payable to Boland
Agri in cash, on the Completion Date, less Boland Agri`s net
actual cash and cash equivalents on hand.
2.4 Specified Assets and Liabilities to be acquired by AFGRI
Operations
AFGRI Operations proposes to acquire the Specified Assets and
Liabilities, which represent all the assets and liabilities of
Boland Agri, excluding the items listed below:
- undisclosed or inadequately provided liabilities as at the
Effective Date; and
- Boland Agri`s shareholder loans, which amounted to
approximately R62 million at the Effective Date; and
- taxation, deferred taxation and bank overdrafts.
3. REGIONAL ADVISORY FORUM
AFGRI has undertaken to establish a Regional Advisory Forum (`the
Forum`) in the Boland Agri region, which Forum will comprise the
following persons:
- five leading farmers from the Boland Agri region, from the ranks
of whom the chairman of the Forum will be elected. The chairman
will automatically become a member of AFGRI`s National Farmer
Advisory Forum. Minutes for meetings of the Forum will be
submitted to AFGRI`s board for the purpose of enabling it to
consider strategies and operational efficiencies for the Boland
Agri region;
- the managing director of AFGRI Operations;
- the chief executive officers of AFGRI Producer Services and AFGRI
Financial Services (two of AFGRI`s divisions), respectively; and
- the chief executive officer of Boland Agri.
The Forum will be responsible for, inter alia, ensuring that a proper
communication channel between the Boland Agri farmers (currently the
shareholders of Boland Agri) and AFGRI exists regarding all matters of
significance to these farmers, and in particular to ensure that farmers
are provided with international best practice service and products by
AFGRI. Furthermore, the Forum will be consulted on all material
developments impacting on shareholders/clients of Boland Agri, i.e. the
farmers in the Boland Agri region.
4. WHY DOES AFGRI WANT TO ACQUIRE BOLAND AGRI?
In recent years, AFGRI has extensively demonstrated its ability to
deliver sustainable quality, value added services to the South African
agricultural community. In pursuit of this strategy, AFGRI has
successfully acquired various agricultural business units and turned
them into more effective service providers to the agricultural
community, whilst at the same time unlocking significant value to the
stakeholders of these businesses.
AFGRI has identified the Western Cape as a vital growth area and is
seeking to gain a more significant presence in this market. AFGRI
believes that it can unlock significant synergies between its current
operations and Boland Agri`s asset base and thereby deliver sustainable
and efficient products and services to the farming community in the
Western Cape.
5. HOW WILL THE OFFER BENEFIT SHAREHOLDERS OF BOLAND AGRI?
The Offer, upon being accepted and implemented, will have three
distinct benefits to the shareholders of Boland Agri, namely:
- it will unlock significant value to the shareholders of Boland
Agri;
- it will lower the silo costs of Boland Agri (refer to 9 below);
and
- it will allow current Boland Agri shareholders access to the
significant product and service offerings that AFGRI will
introduce to Boland Agri.
6. WHY WILL VALUE BE UNLOCKED IN FAVOUR OF BOLAND AGRI`S SHAREHOLDERS?
There are a number of factors that currently prevent Boland Agri`s
shareholders from unlocking the inherent value attributable to their
shares in Boland Agri. These factors include:
- Boland Agri`s shares are not trading on a stock exchange;
- Boland Agri`s shares are not freely tradable or transferable (in
terms of Boland Agri`s memorandum of incorporation and articles of
association, Boland Agri`s shares may only be sold to bona fide
farmers and furthermore such transfers require the approval of the
Boland Agri Board); and
- Boland Agri`s shares may not be encumbered, unless approved by the
Boland Agri Board.
7. WHAT VALUE WILL BE UNLOCKED IF BOLAND AGRI`S SHAREHOLDERS ACCEPT THE
OFFER?
If Boland Agri shareholders accept the Offer and all the suspensive
conditions are fulfilled, Boland Agri will receive a cash payment in
the order of R178 million. Boland Agri (and not its shareholders) will
have to pay all taxes that may become due.
From its retained cash, Boland Agri could:
- repay all the shareholders` loans owing to Boland Agri
shareholders (which amounted to approximately R62 million at the
Effective Date); and
- declare a dividend of the balance of the funds to Boland Agri
shareholders (which will be exempt from Income Tax in their
hands).
The table below indicates, for illustrative purposes only, the
approximate payment to Boland Agri shareholders (which will be exempt
from normal tax in their hands) upon implementation of the Offer.
Table 1: Illustrative payments to Boland Agri shareholders (per share)
----------------------------------------------- --------
Description Amount
(R)
----------------------------------------------- --------
Repayment of shareholder`s loans (Note 1) 1.37
Dividend and return of share capital to shareholder (Note 1) 2.50
Total payment to shareholder (`the AFGRI Payment`) 3.87
----------------------------------------------- --------
Note 1: This table is provided for illustrative purposes only and the
actual payment to Boland Agri shareholders will depend upon,
inter alia:
- the taxes (including Secondary Tax on Companies) payable
by Boland Agri; and
- the individual shareholder`s loan balance at date of
repayment.
The AFGRI Payment (i.e. the after tax consideration that a Boland Agri
shareholder could receive upon implementation of the Offer) compares
very favourably with the historical payments and bonus declarations by
Boland Agri to its shareholders.
For illustrative purposes, the AFGRI Payment compares as follows to
Boland Agri`s historical (average) bonus declarations and (average)
bonus payments to its shareholders:
Table 2: Comparison between the AFGRI Payment and Boland Agri`s
historical average declarations and payments to its
shareholders
---------------------------------- --------- ----------
Description 2004 2003
---------------------------------- --------- ----------
Bonus declaration
AFGRI Payment is equal to:(Note 1) 18.5 times 27 times
Average Boland Agri historical
declarations
---------------------------------- ----------------------
Bonus payment
AFGRI Payment is equal to:(Note 1) 107.5 times 66 times
Average Boland Agri historical
payments
---------------------------------- ----------------------
Note 1: This table is provided for illustrative purposes only and the
comparison will depend upon, inter alia:
- the taxes (including Secondary Tax on Companies) payable
by Boland Agri upon implementation of the Offer;
- the individual shareholder`s current and historical loan
balance; and
- the individual shareholder`s trading history with Boland
Agri, as well as income tax position.
8. HOW WILL ACCEPTANCE OF THE OFFER INFLUENCE THE SERVICE AND PRODUCT
OFFERINGS THAT A BOLAND AGRI SHAREHOLDER CURRENTLY RECEIVES FROM BOLAND
AGRI?
AFGRI will ensure that Boland Agri`s service and product offerings will
not be compromised upon implementation of the Offer, or thereafter.
Furthermore, AFGRI will give access to significant additional products
and services that Boland Agri does not currently offer, including:
- tailor made agricultural insurance packages;
- capital products (including special hedges and other products);
and
- access to AFGRI`s finance and credit products.
*
9. HOW WILL ACCEPTANCE OF THE OFFER AFFECT BOLAND AGRI`S SILOS AND STORAGE
AND HANDLING COSTS?
9.1 Silo costs
AFGRI is acutely aware that Boland Agri shareholders, and in
particular those shareholders that trade in grain, may be
concerned about the impact on silos and silo costs upon acceptance
and implementation of the Offer.
AFGRI has undertaken, in the Offer, to introduce its lower
standard national silo wheat storage and handling costs and
tariffs to Boland Agri`s silos with effect from the Completion
Date.
The following table illustrates AFGRI`s standard national silo
wheat tariffs (to be introduced to Boland Agri), compared to the
current Boland Agri silo tariffs. Farmers should note that
AFGRI`s silo tariffs are fixed until 30 September 2005.
Table 3: Comparative silo tariffs
---------------------------------------------------------
Description AFGRI Boland Agri
---------------------------------------------------------
Daily rate
- handling (R/ton) 30.00 35.00
- storage (cents/ton/day) 0.41 0.41
Seasonal rate (R/ton) 75.00 92.00
Certificate issuing cost (R/ton) 0.80 1.00
---------------------------------------------------------
The table below illustrates the savings that could be generated should
AFGRI`s silo tariffs be applied to Boland Agri`s silos:
Table 4: Percentage saving - silo tariffs
A significant additional advantage applying to AFGRI`s tariffs is that
handling fees only become payable once the grain is withdrawn (instead
of upon delivery). This obviously creates a significant cash flow
advantage to farmers.
------------------------------------------------------
Description % saving
------------------------------------------------------
Daily rate
- handling 14
- storage -
Seasonal rate 18
Certificate issuing cost 20
------------------------------------------------------
****
9.2 Silo maintenance
AFGRI has an excellent track record in terms of:
- silo maintenance;
- silo upgrading; and
- silo technology.
AFGRI will apply its current policies in terms of silo maintenance
and upgrading to the Boland Agri silos.
10. WHAT SHOULD A BOLAND AGRI SHAREHOLDER DO TO ACCEPT THE OFFER?
The Offer has been made to Boland Agri. However, it requires the
approval of Boland Agri`s shareholders pursuant to section 228 of the
Companies Act. As such, Boland Agri`s Board should call a
shareholders` meeting and propose a resolution in terms of which
shareholders will be asked to vote on the Offer. The Offer, in order
to be accepted, requires a simple majority vote from Boland Agri`s
shareholders, i.e. more than 50% of the shareholders present at the
shareholders` meeting should vote in favour thereof.
11. WHAT EFFECT WILL ACCEPTANCE OF THE OFFER HAVE ON SHAREHOLDERS` LOAN
ACCOUNTS WITH BOLAND AGRI?
Upon implementation of the Offer, Boland Agri would have sufficient
cash to settle all the shareholders` loans immediately.
12. DISCLOSURE OF INFORMATION REQUIRED BY THE SECURITIES REGULATION PANEL
(`SRP`) AND THE JSE
12.1 Existing holdings by AFGRI Operations and arrangements with Boland
Agri
AFGRI Operations holds or controls no securities in the issued
share capital of Boland Agri. AFGRI Operations holds no options
to purchase securities in the share capital of Boland Agri and is
not acting in concert with any party pursuant to the Offer.
No arrangements exist between AFGRI Operations (or any party
acting in concert with it) and Boland Agri.
****
12.2 Material conditions of the Offer
The material conditions of the Offer are set out in 2 above. The
posting of the Offer is subject to the condition stipulated in 2.2
above.
12.3 Confirmation of availability of resources
Nedbank Limited has confirmed in writing to the SRP that AFGRI
Operations holds sufficient cash resources to satisfy full
acceptance of the Offer.
12.4 Circular to Boland Agri shareholders and independent opinion
A circular containing full details of the Offer will, subject to
the approval of the SRP, be posted to Boland Agri shareholders
within fourteen days of the date of this announcement (or such
later date as may be announced in the press) (`the Circular`).
Shareholders will be requested to consider and if deemed fit,
approve Ordinary Resolution Numbers 1 and 2 at the general meeting
to be convened in terms of the Circular. The Boland Agri Board is
obliged to appoint an independent advisor to express an opinion on
the terms and conditions of the Offer and the substance of such
advice shall be included in the Circular.
12.5 Pro-forma financial effects
Set out below are the unaudited pro forma financial effects on
AFGRI in respect of the implementation of the Offer by AFGRI
Operations, based on the audited financial statements of AFGRI for
the financial year ended 29 February 2004. The pro forma
financial effects have been prepared for illustrative purposes
only, to provide information as to how the implementation of the
Offer may effect AFGRI, had it been implemented on 1 March 2003
and 29 February 2004, respectively.
---------------------------------------------------------
Audited Pro-forma Change
Before(1 After(2) (%)
) (Cents)
(Cents)
---------------------------------------------------------
Basic earnings per share3
83.5 101.04 20.93
Headline earnings per share3
93.9 95.5 1.75
Net asset value per share 414.1 429.7
3.77
Net tangible asset value per share 394.7
410.3 3.95
---------------------------------------------------------
Notes:
The weighted average number of shares in issue and the number of shares
in issue for purposes of the calculations, are 328 044 269 and 333 100
796, respectively.
Assuming that the acquisition was implemented on 1 March 2003 (for the
purpose of calculating basic earnings per share and headline earnings
per share), and on 29 February 2004 (for the purpose of calculating net
asset value per share and net tangible asset value per share.
Assuming an average interest rate on cash balances of 5% (after tax).
Assuming that negative goodwill arising from the acquisition is
recognised in full (in terms of AFGRI`s current accounting policy in
respect of negative goodwill).
13. INFORMATION SESSIONS
AFGRI intends holding information sessions in the Boland Agri region.
The dates and venues of these information sessions will be published in
the local newspapers and AFGRI encourages Boland Agri shareholders to
attend these information sessions in order to gain further exposure to
AFGRI and to discuss the Offer, its terms and conditions and its
implications for Boland Agri shareholders.
14. SHAREHOLDERS REQUIRING FURTHER INFORMATION ON AFGRI OR THE OFFER
Shareholders who are unable to attend the information sessions,
contact Cobus Human of Quaestor Capital on (011) 535 4600.
Johannesburg
16 September 2004
Corporate Advisor to AFGRI on the Offer
Quaestor Capital (Proprietary) Limited
Attorneys to AFGRI
Brink Cohen Le Roux Inc
JSE Sponsor to AFGRI
Rand Merchant Bank (A division of FirstRand Bank Limited)
CORPORATE FINANCE
Date: 16/09/2004 05:05:03 PM Produced by the JSE SENS Department
