TIDMZAM
RNS Number : 6213M
Zambeef Products PLC
17 September 2019
17 September 2019
Zambeef Products plc
("Zambeef" or the "Group")
Disposal of Sinazongwe Farm for USD10 million
Zambeef (AIM: ZAM), the fully integrated cold chain food
processing and retailing group with operations in Zambia, Nigeria
and Ghana, announces that, in line with its strategy of focussing
on its core business, disposing of low-performing and/or non-core
assets and reducing gearing/debt, it has entered into a binding
Sale and Purchase Agreement ("SPA") with Chenguang Biotech (Zambia)
Agri-Dev Limited ("Chenguang") for the sale, subject to the
fulfilment of certain conditions precedent, of Zambeef's Sinazongwe
Farm for a cash consideration of USD10 million (the "Transaction").
The key terms of the Transaction are summarised below:
1) Purchase Price: USD10m
2) Properties/Farm:
a) Remaining Extent of Farm No. 4906 (R/E of F4906) with an area of c.2,521 Ha;
b) Lot No. 18835/M with an area of c.3 Ha;
c) Lot No. 18836/M with an area of c.5 Ha.
3) Excluded Assets:
The Transaction excludes the following assets:
a) Crops growing and/or stored on the Farm;
b) Feedlot and Abattoir (c.20 Ha), which will separately be
sub-divided and remain in the name, title and ownership of
Zambeef;
c) Plant, equipment and machinery relating to the Feedlot and Abattoir.
4) Payment Terms:
a) On signing the SPA - a Deposit of 10 per cent. (USD1m) of the
Purchase Price ("Deposit");
b) Balance of 90 per cent. (USD9m) to be paid on or around the
Completion Date.
5) Completion Date:
a) On or before 15 March 2020;
b) Such other Completion Date as may be mutually agreed in writing by the parties.
6) Conditions Precedent:
a) Zambeef Conditions Precedent:
i.) Sub-division of the Feedlot and Abattoir (c.20 Ha) from the R/E of F4906;
ii.) Obtaining state consent to assign the Properties - subject
to receiving Chenguang's Zambia Development Agency ("ZDA")
investment license;
iii.) To the extent necessary, Zambeef shall notify and obtain
the requisite approvals from the Lusaka Securities Exchange and the
Zambian Securities and Exchange Commission;
iv.) To the extent necessary, Zambeef shall obtain the consent
of its lenders to effect the Transaction;
v.) Zambeef shall obtain shareholder approval for the
Transaction (further details disclosed later in this
announcement);
vi.) Discharge the Deg-Deutsche Investtitions-Und
Entwicklungsgesellschaft Mbh ("DEG Mortgages") over the
Properties/Farm;
vii.) Approval of the Transaction by CDC Group plc;
viii.) Approval of the Transaction by the Board of Zambeef.
b) Chenguang Conditions Precedent:
i.) Chenguang shall obtain an investment license from the ZDA.
c) Joint Zambeef/Chenguang Conditions Precedent:
i.) Competition and Consumer Protection Commission ("CCPC")
provides either negative clearance or approval to the Transaction,
or if conditional approval is obtained, that the parties accept
such conditions in writing within 14 days of receipt of CCPC's
notification.
7) Non-Completion:
If the Transaction fails to complete for any reason by either
party, then the Transaction will be cancelled and Zambeef shall
refund the USD1m Deposit without any interest. The refund shall not
apply to Chenguang's 50 per cent. share of costs relating to Zambia
Revenue Authority Property Transfer Tax ("ZRA PPT") and CCPC
fees.
8) Other Key Terms:
a) CCPC fees shall be borne equally by both parties.
b) ZRA PPT shall be borne equally by both parties.
c) On signing the SPA and payment of the USD1m Deposit, Zambeef
shall permit Chenguang to utilise three houses (identified by
Zambeef) and access to one centre pivot of approximately 80
hectares of land to enable Chenguang to commence with initial
research, planning, design and mapping works on its farming project
(including conducting trials).
d) Vacant possession of the Farm shall be given to Chenguang on the Completion Date.
e) From the Completion Date to 31 May 2020, Chenguang shall
permit Zambeef to make free and unfettered use of the silos,
weighbridge, selected houses and selected (mutually agreed) plant,
equipment and machinery for the purpose of harvesting and storing
approximately 7,500 M.T. of soya beans and maize harvested from the
Farm.
f) Chenguang undertakes that it will retain and re-employ all
local Zambian staff from the Completion Date and in this regard, on
or before the Completion Date, Zambeef will lawfully terminate the
employment of all the employees on the Farm. Zambeef shall pay all
wages & terminal benefits due to the employees.
g) Chenguang undertakes to grant Zambeef free and unfettered use
of up to 200,000 litres of water per day for use on Zambeef's
Feedlot and Abattoir.
Rationale for disposal and use of proceeds
The Group has four farming estates/blocks, as detailed in the
table below:
Farm Name Total Land Irrigated Rainfed Land Total Developed
Area Land (Ha) Arable Land
(Ha) (Ha) (Ha)
Mpongwe Farm 46,813.3 3,343.5 7,622.3 10,965.8
----------- ---------- ------------- ----------------
Chiawa Farm 8,209.4 2,152.0 - 2,152.0
----------- ---------- ------------- ----------------
Sinazongwe
Farm 2,549.8 1,815.0 100.0 1,915.0
----------- ---------- ------------- ----------------
Huntley Farm 1,716.0 662.0 1,054.0 1,716.0
----------- ---------- ------------- ----------------
Total Land
Area (Ha) 58,234.5 7,972.5 8,776.3 16,748.8
----------- ---------- ------------- ----------------
Mpongwe Farm is situated in the Copperbelt Province of Zambia,
approximately 120 km south-west of Ndola. The farm was acquired by
Zambeef in 2011 for approximately USD47m.
Chiawa Farm is located in the southern Zambezi valley of Zambia,
at the convergence of the Kafue and Zambezi Rivers, approximately
10 km north-east of Chirundu town. The farm was acquired by Zambeef
in 2009 for approximately USD6m.
Sinazongwe Farm is located in the southern Zambezi valley of
Zambia, along the northern shore of Lake Kariba, approximately 70
km south-east of Choma town. The farm was acquired by Zambeef in
2003 for approximately USD2.3m.
Huntley Farm is located in the Chisamba District, approximately
55 km north of the capital, Lusaka.
Sinazongwe Farm is made up of three land parcels (title deeds)
comprising a total land area of approximately 2,549.8 Ha. of which
approximately 1,815 Ha is developed, arable land under irrigation.
The main crops grown on the Farm are soya beans (November to March)
and wheat (April to September).
For the FYE September 2018, Sinazongwe Farm:
a) generated negative EBITDA of USD0.3m;
b) was valued at USD10.3m, accounting for 4 per cent. of Group net asset value; and
c) accounted for 1.7 per cent. of Group revenues.
Sinazongwe Farm is not a significant part of our cropping
business; for the FYE September 2018, the farm accounted for:
a) 11 per cent. of Zambeef's total developed arable cropping land;
b) 11 per cent. of Zambeef's total cropping grain production; and
c) 9 per cent. of Zambeef's total cropping revenue.
This disposal of Sinazongwe Farm is in line with the Group's
strategy of focusing on its core business of the production and
retailing of cold chain meat and dairy products and stockfeed.
Furthermore, the Group's largest, most efficient and most
profitable farming estate is Mpongwe Farm, and, as mentioned in the
Chief Executive Officer's Review in the 2018 Annual Report, Zambeef
has been actively seeking buyers for its Chiawa and Sinazongwe
Farms.
Finally, the need to have four farming estates very far apart
from each other is costly, inefficient and administratively
cumbersome.
The net sale proceeds will be used to pay down the Group's debt
and thus reduce gearing and interest costs. Net proceeds (after
payment of various regulatory and other professional fees/costs)
are expected to be c.USD9.25m.
Categorisation of the Transaction on the Lusaka Stock
Exchange
The Transaction is classified as a Category 1 transaction in
terms of Section 9 of the Lusaka Securities Exchange ("LuSE")
Listings Requirements. As a result, this Transaction will require
formal approval by Zambeef shareholders. Accordingly, the Company
has commenced work on a circular to be posted to shareholders to
convene the necessary extraordinary general meeting of the Company
to approve the Transaction. Approval of the Transaction requires a
simple majority of Zambeef shareholders to vote in favour. Further
updates will be made as and when appropriate.
Dr. Jacob Mwanza, Chairman of Zambeef, commented:
"This Transaction is in line with and a continuation of the
Group's strategic vision, which will allow Zambeef to focus on
growing its core business, which is the production and retailing of
cold chain meat and dairy products and stockfeed, delivered through
the Group's extensive processing, distribution and retail network.
Furthermore, the Transaction will allow Zambeef to continue to
reduce its overall gearing, and in so doing, reduce interest
costs."
For more information, please visit www.zambeefplc.com
or contact:
Zambeef Products plc Tel: +260 (0) 211 369003
Francis Grogan, Chief Executive Officer
Strand Hanson Limited Tel: +44 (0) 20 7409
James Spinney 3494
Ritchie Balmer
Eric Allan
Finncap Tel: +44 (0) 20 7220
Christopher Raggett 0500
Powerscourt Tel: +44 (0)20 7250
Nick Dibden 1446
Bethany Johannsen
Pangaea Securities Tel: +260 (0) 211 220
Wendy Tembo 707
Notes to the editors
The Zambeef Group is one of the largest integrated cold chain
food producers in Zambia, involved in the production, processing,
distribution and retailing of beef, chicken, pork, milk, eggs,
dairy products, fish, flour and stock feed. The Group also has
large cereal row cropping operations (principally maize, soya beans
and wheat), with approximately 7,973 hectares of row crops under
irrigation, which are planted twice a year and a further 8,776
hectares of rain-fed/dry-land crops available for planting each
year.
Chenguang Biotech (Zambia) Agri-Dev Limited is a subsidiary of
the Chenguang Biotech Group Co. Limited based in China ("CCGB").
CCGB is a listed company on the Shenzhen stock exchange with 22
subsidiary companies. The Chenguang Group is one of the worlds
leading producers and suppliers of natural plant extraction for
paprika oleoresin, capsicum oleoresin and marigold oleoresin. The
Chenguang Group also manufactures natural pigments, natural spice
extracts, essential oils, natural nutrient and medicinal extracts
and protein.
The information contained within this announcement is deemed by
the Company to constitute inside information as stipulated under
the Market Abuse Regulations (EU) No. 596/2014. Upon the
publication of this announcement via Regulatory Information
Service, this inside information is now considered to be in the
public domain.
- Ends -
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END
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