| Wed 24 Nov 2004, 10:01 | | Afgri announces landmark bee deal in agricultural |
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afgri announces landmark bee deal in agricultural sector
AFGRI LIMITED
Incorporated in the Republic of South Africa)
Registration number: 1995/004030/06
Share Code: AFR
ISIN : ZAE000040549)
(`AFGRI` or `the company`)
South Africa`s leading agricultural services group, Afgri Limited, has announced
that a broad-based BEE consortium, The Agri Sizwe Empowerment Trust, will
acquire 26.77% of Afgri Operations for R502 million.
Afgri managing director Jeff Wright says the transaction represents a
breakthrough for broader BEE participation in the agricultural sector and offers
Afgri a window of opportunity to develop new market potential.
`We`re very excited at having concluded this transaction. Throughout the 18
months of negotiations, both Afgri and Agri Sizwe have identified synergies and
formed a solid partnership based on a common vision. The quality leadership and
talent represented in the partnership, through The Agri Sizwe Empowerment Trust,
shares an ethos and work ethic similar to Afgri`s. In doing this transaction we
were adamant that our BEE partners should represent as broad a constituency of
agricultural and business interests as possible. The Trust represents thousands
of historically disadvantaged South Africans - something we worked very hard to
achieve.
`The transaction is also of considerable benefit to Afgri shareholders and
customers,` adds Wright.
The Trust will appoint two representatives to Afgri`s board and two
representatives to the executive committee, who will assist in its
transformation initiatives and identify new business opportunities in Afgri
Operations respectively. `We believe this transaction vastly improves our
credibility and standing as a South African organisation representative of all
its people, and the benefits of this new partnership will include improved
leadership and a rich pipeline of new business opportunities, particularly in
the fast-growing emerging commercial farming market.`
The transaction has valued Afgri Operations at R2 billion, with the Land Bank
undertaking to fund the BEE consortium`s acquisition of 26.77% of Afgri
Operations for R502 million. Afgri Limited will cede R100 million as refundable
collateral to the Land Bank in support of the transaction.
Shareholders will benefit by way of a R367 million distribution of the proceeds
from the transaction.
Afgri Operations will continue to manage the business in terms of a partnership
agreement concluded with the Trust.
The Trust will be entitled to receive 26.77% of the net income of Afgri
Operations, with cash distribution to the Trust structured to mirror Afgri`s
dividend ratio policy. This should enable it to pay off the Land Bank loan
within eight years. Wright says the intention is to convert the Trust`s
interest in Afgri Operations into a 25.1% direct shareholding in Afgri Limited
once the Land Bank loan is repaid.
In seeking a BEE partner, the Afgri board adopted a set of criteria to use as a
guideline in its discussions with interested BEE parties. It decided the BEE
parties must have broad-based representation and add value to the business, the
deal must be conducted at a market-related price, the BEE partner must be
actively involved in the activities of Afgri and Afgri previously disadvantaged
employees should participate meaningfully in the transaction. The BEE partner
had to have access to funding, and the deal would have to establish Afgri as a
black empowered enterprise, as defined in the BEE Act.
The Afgri board says the transaction with The Agri Sizwe Empowerment Trust
fulfils each of these criteria. For its part, the Trust brings the following
benefits to Afgri:
access to new markets - development farmers, new customers and new networks,
including government departments and parastatals;
access to opportunities, such as those represented by resolution of land claims
and contract farming, as well as advice on structuring BEE transactions;
help in attracting skilled black talent to Afgri and fast-tracking
transformation;
strengthening the funding base, enhancing existing relationships and opening
doors to funding institutions such as the Land Bank; and
`first mover` advantage in the development of new products and services,
particularly for the emerging farmer market.
The Trust comprises a combination of black business leaders and broad-based BEE
entities. The Trust beneficiaries are Agri Sizwe, Afgri Operations Empowerment
Scheme, the National African Farmers Union (NAFU), the South African
Agricultural Plantation and Allied Workers Union (SAAPAWU) represented by
Basebenzi Investments, the National Emergent Red Meat Producers Organisation
(NERPO) and a women`s group, Bunang Sizwe Investments.
Comments Trust spokesperson Dominic Sewela, `In approaching the Afgri
transaction, Agri Sizwe took a view on the intrinsic value of the business, its
ability to grow both revenue and profit, its cash generating capability and its
attractiveness to a third party funder.
`A stake in the operating entity, rather than shares in the holding company,
also appealed to us as we wanted direct access to cash flow to repay the loan as
soon as possible, after which we will in any event have access to share
ownership in the holding company,` he says.
Wright concludes: `After 18 careful months of negotiation, it was a business
decision taken by like-minded parties to unlock value in the Afgri group, both
for shareholders and the Empowerment Trust.`
About AFGRI
Afgri is South Africa`s leading agricultural services group, with operations in
South Africa, southern Africa and Australia.
Listed on the JSE Securities Exchange SA, Afgri`s business success is vested in
providing world-class full-spectrum service to targeted producers, processors
and consumers of agricultural products and services, as well as adding long-term
value to shareholders.
Afgri`s business is housed in Afgri Operations in four business pillars: Afgri
Products, Afgri Logistics & Financial Services, Afgri Producer Services and
Afgri Commercial Services.
About The Agri Sizwe Empowerment Trust
Agri Sizwe is the largest beneficiary of the Trust. It was founded by prominent
business people in the agricultural and other sectors, including Moses Moloele,
Dominic Sewela, Khomotso Thoko, Moji Mogari, Lehlohonolo, Andrew Makenete and
Mabel Mathlare. Their interests range from directorships of financial
institutions to state-owned oganisations. Two of Agri Sizwe`s founders were
also founders of Exel Petroleum.
SAAPAWU is an off-shoot of COSATU and was established to promote and protect the
interests and rights of farm workers and landless tenants. Founded in 1995, the
union has enrolled 250 000 paid-up members, employed by 42 000 commercial
farmers and 32 000 small-scale farmers. SAAPAWU has since merged with the Food
and Allied Workers` Union (FAWU). They will be holding their share in this deal
through Basebenzi an investment company of FAWU and SAAPAWU.
NERPO was established in 1998 to promote the entry of emerging farmers and black
business people to the commercial red meat industry. To date, NERPO has entered
into a number of joint ventures including one with Vleisentraal which focuses on
the training of black cattle farmers.
NAFU, formed in 1991, is represented in all nine provinces and offers a full
spectrum of services to the emerging commercial farmers and people engaged in
agri-business. Its mission is the development of African farmers who were
disadvantaged by the policies of the past and its vision is to be the leading
organisation that meets the needs of designated farmer groups. NAFU has been
instrumental in fast-tracking the programme of land redistribution for
agricultural development and assisting government in formulating its AgriBEE
framework.
Women`s empowerment group Bunang Sizwe Investments was established to create
business and job opportunities for women in rural areas. The women are involved
in farming activities such as the production of broiler chickens, fresh fruit
and vegetables.
ISSUED AFGRI LIMITED
FOR:
CONTACT: Jeff Wright, CEO, Afgri Limited, 082 806 1284 or
Richard Potash, CEO, Afgri Financial Services, 082 824
2007
FAX NO: 011 463 4139
E-MAIL: jwright@afgri.co.za or rpotash@afgri.co.za
WEBSITE: www.afgri.co.za
ISSUED TISH STEWART PR ASSOCIATES
BY:
CONTACT: Tish Stewart 011 325 4195 / 082 443 6399
FAX NO: 011 325 4199
E-MAIL: tish@tspr.co.za
DATE: 24 November 2004
Date: 24/11/2004 09:03:04 AM
Produced by the JSE SENS Department
