CATEGORY 1 DISPOSAL BY ZAMBEEF PRODUCTS PLC (“ZAMBEEF”) OF ITS WHOLLY OWNED
SUBSIDIARY ZAMANITA LIMITED (“ZAMANITA”)
AND WITHDRAWAL OF CAUTIONARY
ANNOUNCEMENT

INTRODUCTION
Zambeef shareholders (“Shareholders”) are referred to the announcements published by the Company on 3rd December, 2014 and 5th January 2015 respectively, (“the Announcements”) wherein Shareholders were advised that Zambeef had entered into preliminary discussions with a third party regarding the potential full disposal of Zamanita Limited (the “Transaction”), the Zambeef Group’s (the “Group”) wholly owned subsidiary.

Zambeef, the fully integrated agribusiness with operations in Zambia, Nigeria and Ghana, announces that it has entered into a sale and purchase agreement (the “SPA”), pursuant to which it has agreed to dispose of its wholly owned subsidiary, Zamanita Limited (“Zamanita”) to Cargill Holdings BV (“Cargill”) (the “Disposal”).

NATURE OF BUSINESS OF ZAMANITA
Zamanita is one of the largest edible oil and soybean meal producers in Zambia, serving both domestic and export markets as well as selling into the domestic refined oils market. Following Completion, Cargill will assume sole ownership of Zamanita’s intellectual property, together with all of its remaining assets and debts.

For the year ended 30 September 2014, Zamanita’s audited accounts recorded revenue of USD67.9 million (ZMW399.2 million), a gross profit of USD9.9 million (ZMW58.3 million) and a loss after tax of USD2.0 million (ZMW11.5 million). Zamanita’s net assets at 30 September 2014 were USD21.9 million (ZMW137.4 million). The book value of Zamanita in the Group’s accounts was USD26.2 million (ZMW164.0 million).

ZAMBEEF’S RATIONALE FOR SELLING ZAMANITA
Zambeef acquired Zamanita for US$16.0 million in January 2008, as a continuation of its strategy of vertical integration. In addition to its position as a leading edible oil and soybean meal producer, Zamanita owned the only solvent extraction plant in Zambia.

Over the last five years, the oil seed crushing industry has, together with many other domestic industries, matured and a number of new participants have also entered the market. As a result, it is no longer essential for Zambeef to be involved in this industry in order to secure its required supply of high quality soybean meal at a competitive price. Furthermore, oil seed crushing is a highly specialised and capital intensive business which is subject to fluctuations in foreign exchange rates and commodity prices.

Following the Disposal, there will be no change to the Group’s board of directors or senior management team and its operational focus will remain unchanged.

CONSIDERATIONS AND TERMS OF THE DISPOSAL
Zambeef has agreed to dispose of Zamanita to Cargill for a cash consideration of USD25.7 million (the “Consideration”) payable on Completion Date. The Consideration will be adjusted for estimated closing working capital less estimated net financial debt. All of Zamanita’s third party financial debt will be transferred out of the Group in accordance with the terms of the SPA.

THE EFFECTIVE DATE OF THE TRANSACTION
In accordance with the terms and conditions of the Sale Agreement, the effective date of the SPA shall be either 1 May 2015 or the first day of the month following the satisfaction of the Conditions Precedent, whichever is later (the “Completion Date”).

CONDITIONS PRECEDENT
Completion is subject to the conditions precedent (the “Conditions Precedent”), which include:

• The Competition and Consumer Protection Commission of Zambia providing either negative clearance or approval for the Disposal, as required;
• Approval by Shareholders at a duly convened EGM, and approval by Cargill’s board of directors;
• Receipt of approval from the Lusaka Stock Exchange, the Securities and Exchange Commission in Zambia and the AIM of the London Stock Exchange, where required in each case;
• The requisite consents and/or waivers from the lenders to the Group for the Disposal and the change in control of Zamanita;
• Zambeef and Zamanita having settled all intercompany loans and debt which at 30 September 2014 was a net amount due to Zambeef of USD3.4 million (ZMW21.6 million);
• Zambeef procuring the issuance of a stand-by letter of credit in favour of Zamanita to cover the potential ZRA duty claim.
• due execution and signing of an agreement relating to certain administrative and support functions for Zamanita for a transitional period, up to 31 December 2015 (the “Transitional Services Agreement”);
• Zamanita entering into and executing a new lease agreement with Zambia Railways Limited in respect of Stand number 4816 (private siding number 1143) in Lusaka.

APPLICATION OF THE SALE PROCEEDS
The Disposal will allow Zambeef to focus on growing its core business, which is the retailing of cold chain meat and dairy products, delivered through the Group’s extensive processing, distribution and retail network. Furthermore, the Disposal will allow Zambeef to unlock value, via a reduction in overall gearing (particularly US Dollar denominated debt) and in so doing reduce exchange rate exposure and interest costs.

The Financial Effects of the Disposal
The unaudited pro forma financial effects of the Disposal (the “Financial Effects”) on Zambeef’s basic earnings per share (“EPS”), headline earnings per share (“HEPS”), net asset value per share (“NAVPS”) and net tangible asset value per share (“NTAVPS”) are set out below using the Group’s audited accounts and the audited accounts of Zamanita for the year ended 30 September 2014.

The Financial Effects have been prepared for illustrative purposes only, to assist shareholders in assessing the financial impact of the Disposal on Zambeef and, because of their nature, do not necessarily fairly present Zambeef’s financial position, changes in equity, and results of operations or cash flows after the Disposal. The Financial Effects are the responsibility of the directors of Zambeef.

Other Significant terms of the SPA
Other key terms included in the SPA are summarised below:

• The Completion Date is scheduled for the later of 1 May 2015 or the first day of the month following the satisfaction of the Conditions Precedent.On Completion:
  • Zambeef will transfer 100 per cent of Zamanita’s issued share capital to Cargill;
  • Zamanita will be acquired by Cargill with the existing Standard Chartered Bank Zambia Plc bank debt and encumbrances, which as at 30 September 2014 were approximately USD27.0 million (ZMW169.4 million); and
  • Cargill will pay the Consideration to Zambeef on the Completion Date with the adjustments described above;
• The SPA excludes from the Disposal the potential Zambia Revenue Authority (“ZRA”) tax liability initially announced on 3 February 2012, of ZMW54.6 million (approximately USD8.6 million), for which Zambeef will assume full responsibility pending completion of the ongoing determination proceedings;
• The Conditions Precedent have to be completed before the expiry of six (6) months from the signature date of the SPA unless the date is extended by mutual consent;
• If at any time before completion Cargill considers, acting reasonably, that a material adverse change has occurred since the signing of the SPA, then Cargill may either proceed to completion or elect to terminate the SPA by notice to the Seller; and
• Zambeef has given certain representations, warranties, undertakings and indemnities to Cargill relating to the general status of Zamanita’s assets and contracts, financial position, tax matters, environmental compliance and other relevant Zambia legislation.

CLASSIFICATION OF THE TRANSACTION
The Transaction is classified as a Category 1 transaction in terms of section 9 of the LuSE Listing Requirements and is subject to shareholder approval. A Circular convening a general meeting and providing further details of the Transaction will be posted to shareholders in due course.

WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
Shareholders are referred to the last cautionary announcement dated 05th January 2015 and are advised that as the details of the transaction referred to above have been announced to Zambeef shareholders, caution is no longer required to be exercised by shareholders when dealing in their Zambeef shares.

3 February 2015

For further information, please contact:

Sponsoring Broker and Transaction Advisor

Pangaea Securities Limited
(Member of the Lusaka Stock Exchange)
(Regulated by the Securities and Exchange Commission)

Tel: +260 (211) 220 707 or 238 709 / 16 Fax +260 (211) 220 925
Email: [email protected]
Farmers House at Central Park, 3rd Floor, Cairo Road, P.O. Box 30163 Lusaka, Zambia

First Issued on 3rd December 2014

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