| Fri 7 Apr 2006, 9:00 | | Afgri Limited - Disposal By Afgri Operations Limit |
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AFR
AFR
Afgri Limited - Disposal By Afgri Operations Limited ("Afgri
Operations"), A Wholly Owned Subsidiary Of Afgri, Of Its Cotton
Ginning Interests (Clark Cotton) And Withdrawal Of Cautionary
Announcement
AFGRI LIMITED
Incorporated in the Republic of South Africa)
Registration number: 1995/004030/06
Share Code: AFR
(ISIN: ZAE000040549)
("AFGRI" or "the Company")
DISPOSAL BY AFGRI OPERATIONS LIMITED ("AFGRI OPERATIONS"), A
WHOLLY OWNED SUBSIDIARY OF AFGRI, OF ITS COTTON GINNING INTERESTS
(CLARK COTTON) AND WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
1. The Transaction
Shareholders are advised that AFGRI Operations has agreed with
Cargill Incorporated ("Cargill") to dispose of all its cotton
ginning interests to Cargill ("the Transaction").
The cotton ginning interests comprise three gins in Zambia,
three in South Africa and two gins in Malawi. The financial
results of the cotton ginning interests are included in the
Cotton business segment of the AFGRI financial statements.
2. Terms and Conditions of the Transaction
2.1. Salient Terms and Conditions
The disposal consideration will be US$15m for the fixed
and intangible assets of Clark Cotton in South Africa
and Zambia as well as Clark Cotton"s 51% investment in
Clark Cotton (Malawi) Limited. In addition, Cargill
will acquire, at book value, the inventory owned by
Clark Cotton and will collect the outstanding debtors of
Clark Cotton in South Africa and Zambia. Cargill will
furthermore procure the repayment of Clark Cotton"s
working capital loans to Clark Cotton Malawi.
The effective date of the Transaction will be the date
of fulfilment of all the suspensive conditions, which is
expected to be 1 May 2006.
2.2. Suspensive Conditions
Implementation of the Transaction is subject to the
fulfilment of, inter alia, the following suspensive
conditions by 30 April 2006:-
- the requisite statutory and regulatory approvals being
obtained, including the approval of the relevant Competition
authorities in South Africa, Zambia and Malawi;
- the written waiver from Admarc Investments Holding Company
Limited of all its pre-emptive or other rights to acquire the
AFGRI Operations investment in Clark Cotton (Malawi) Limited; and
- the confirmation from Cargill regarding the completion of a
due diligence investigation in Clark Cotton to the satisfaction of
Cargill.
3. Rationale for the Transaction
Clark Cotton is increasingly exposed to the international cotton
commodity market as the market for cotton lint within the South
African textile industry declines. Clark Cotton does not have
the expertise, or the critical mass, to effectively market its
cotton lint in the international market.
4. Pro-forma Financial Effects
Set out below are the un-audited pro forma financial effects on
AFGRI in respect of the implementation of the Transaction by
AFGRI Operations, based on the un-audited financial statements
of AFGRI for the six months ended 31 August 2005. The pro forma
effects are the responsibility of the directors and have been
prepared for illustrative purposes only to provide information
as to how the implementation of the Transaction may affect AFGRI
and because of its nature, may not give a true reflection of the
financial position, changes in equity, results of operations or
cash flows of the Company.
Un- Pro Change
audited Forma %
Before1 After
Cents Cents
Basic Earnings per Share2 18,1 17,7 - 2,1%
Headline Earnings per Share2 15,2 16,7 +10,0%
Net Tangible Asset Value per 302,0 307,7 + 1,9%
share3
Net Asset Value per share3 336,4 336,1 - 0,1%
Notes and assumptions
1. Extracted from the audited published results of AFGRI for the
six months ended 31 August 2005.
2. For the purposes of calculating Basic Earnings per Share and
Headline Earnings per Share in respect of the Transaction, it was
assumed that:
a)the Transaction was implemented on 1 March 2005;
b)assets with a book value of R259 million were realised
at book value;
c)there is a write-off of related deferred tax-assets with
a value of R4.6m and the realisation of a foreign
currency translation reserve in respect of the
investment in Malawi of R1.2m which reduces the Earnings
per Share but not the Headline Earnings per Share.
3. For the purposes of calculating Net Tangible Asset Value and
Net Asset Value per Share in respect of the Transaction, it was
assumed that:
a)the Transaction was implemented on 31 August 2005;
b)the book value of the intangible assets sold were R20
million.
4. The weighted average number of shares in issue and the number
of shares in issue for purposes of the calculations are 329 671
915 and 331 103 785 respectively.
5. For the purposes of calculating the un-audited financial
effects an exchange rate of R5.80 to the US$ at 1 March 2005 was
used and it is assumed that the funds would be used to offset
borrowings. To calculate the impact of the reduction in net
borrowings, an interest rate of 7.25% was applied to the net cash
flow over the relevant period.
5. Proceeds on sale
Rm
Disposal consideration * 87
Net proceeds on realisation of working capital assets 172
Proceeds 259
* (US$15m @ effective exchange rate of ZAR5.80: US$1)
Shareholders are advised that in terms of the Transaction,
Cargill will buy the trade debtors of Clark Cotton and will pay
AFGRI as and when it collects the Debtors for a period of 3
months. At the end of three months, the debtors which have not
been collected will be ceded to AFGRI in final settlement of the
transaction consideration. In effect, Cargill will be acting as
AFGRI"s agent in the collection of Clark Cotton"s debtors book.
The total value of the Clark Cotton debtors book is ZAR92m and
forms part of the R172 million working capital assets.
The proceeds from the Transaction in the amount of R259m will be
utilised by AFGRI to repay Clark Cotton"s working capital
liabilities and for future acquisitions and business expansion.
6. Withdrawal of Cautionary Announcement
Shareholders are advised that, as details of the Transaction
have now been disclosed, they may exercise normal practices when
trading in AFGRI shares.
Johannesburg
7 April 2006
Sponsor
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
Legal Advisors
FLUXMANS INC
Date: 07/04/2006 09:00:21 AM Produced by the JSE SENS Department
