R907m of­fer to ac­quire Sovereign Food

The all-cash of­fer is priced at R12 per Sovereign Food share, with a rein­vest­ment op­tion

The Star Early Edition - - COMPANIES - Sandile Mchunu

SOVEREIGN Food In­vest­ments has re­ceived a firm in­ten­tion from a special pur­pose ve­hi­cle con­trolled by Cap­i­tal­works to ac­quire a con­trol­ling in­ter­est in Sovereign Food for R907 mil­lion in an all-cash buy-out, the JSE-listed poul­try pro­ducer said yes­ter­day.

The all-cash of­fer is priced at R12 per Sovereign Food share, with a rein­vest­ment op­tion avail­able to share­hold­ers.

The com­pany’s share price closed un­changed at R11.75 on the JSE yes­ter­day.

Cap­i­tal­works is a pri­vate eq­uity firm fo­cused on mid-mar­ket in­vest­ments in South Africa.

“Share­hold­ers can rein­vest by dis­pos­ing of their Sovereign Food shares for shares in the special pur­pose ve­hi­cle (Bidco), up to an ag­gre­gate 15 per­cent in­ter­est in Bidco fol­low­ing im­ple­men­ta­tion of the of­fer,” the group said.

The of­fer is fully funded by Cap­i­tal­works and is not con­di­tional upon any ex­ter­nal fund­ing.

The group added that share­hold­ers would re­ceive in­ter­est of 7 per­cent on the cash con­sid­er­a­tion, com­pounded monthly, from Jan­uary 1, 2018, un­til they re­ceive the cash con­sid­er­a­tion if the of­fer is im­ple­mented af­ter this date, al­though ex­pec­ta­tions are that it will be com­pleted be­fore year end.

Sovereign Food chief ex­ec­u­tive Chris Coombes said: “We are pleased that share­hold­ers held out for an­other sig­nif­i­cantly higher of­fer.

“Share­hold­ers now have the abil­ity to ac­cept an at­trac­tive cash of­fer, de­spite the very lim­ited cur­rent liq­uid­ity in Sovereign’s shares.”

Last year an­other poul­try pro­ducer Coun­try Bird failed to buy out Sovereign’s ma­jor­ity stake. Coun­try Bird holds a 9.5 per­cent stake in Sovereign and it of­fered to pay R9 a share last year.

A key con­di­tion to the of­fer is that Cap­i­tal­works must ac­quire more than 50 per­cent of Sovereign Food’s is­sued shares.

Cap­i­tal­works an­nounced up front sup­port from share­hold­ers hold­ing more than 50.8 per­cent of Sovereign Food’s shares, demon­strat­ing strong sup­port for the of­fer.

The group said the of­fer comes at a 33.33 per­cent pre­mium to the failed of­fer from Coun­try Bird Hold­ings (CBH) last year, which was priced at R9 per Sovereign Food share, vin­di­cat­ing the Sovereign Foods board’s strong rec­om­men­da­tion to its share­hold­ers at the time not to ac­cept the Coun­try Bird of­fer.

The group added that the R12 of­fer also came at a 44.58 per­cent pre­mium to the clos­ing price of a Sovereign Food’s share on Novem­ber 9, 2016, the day af­ter it be­came known that the CBH of­fer had failed.

Sovereign Food’s chair­per­son Tom Pritchard said the board wel­comed and sup­ported this of­fer from Cap­i­tal­works.

“The board was al­ways open to rec­om­mend­ing an of­fer to share­hold­ers, pro­vided sig­nif­i­cant share­holder value was un­locked,” he said.

The of­fer is sub­ject to Com­pe­ti­tion Com­mis­sion ap­proval and the delist­ing of Sovereign from the JSE.

The group said the of­fer comes at a 33.33% pre­mium to the failed of­fer from Coun­try Bird.

PHOTO: SUP­PLIED

Chick­ens be­ing pro­cessed at Sovereign Food. Cap­i­tal­works has put in a bid to ac­quire the com­pany in an all-cash buy-out.

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