The UK’s government-backed Commonwealth Development Corp. (CDC) has invested $65 million, including $9.5 million in stock and $55.5 million in cash, in exchange for a 17.5% direct stake and voting rights exceeding 34% in Zambian agricultural company, Zambeef.
Zambeef will use $23 million of the investment to fund the buyout of its poultry joint venture partner, RCL Foods Ltd., from its Zambian chicken joint venture, after RCL expressed it would exercise its option to be bought out and released from its Zamhatch and Zam Chick ventures earlier this year.
A further $38.2 million will be used to refinance debt and to finance the $3.4 million in costs and fees associated with the transaction. Funds will also be allocated in support of the launch of Zambeef’s new outlet stores, and to be used for working capital, according to a company statement.
Upon news of the investment, Zambeef’s stock soared 39% on the Alternative Investment Market (AIM) giving the company a value of $36.3 million, with the daily volume of stock trading at 17 times the volume of the three-month daily average according to Bloomberg.
“I am delighted that CDC is becoming a supportive long-term shareholder in Zambeef plc,” said Dr. Jacob Mwanza, Chairman of Zambeef Products. “We have a longstanding relationship with them and they have a long history of making successful investments in our Country, including plenty within the agricultural and food sectors.
“With an arguably already over-leveraged balance sheet raising more debt was not desirable, explains broker, finnCap to ProactiveInvestors, adding “there was inadequate time to arrange an orderly sale of assets while paying RCL in Zambeef shares could have resulted in at least 50% dilution to existing shareholders.”
ProactiveInvestors asserts that according to finnCap’s Raymond Greaves, with the deal resulting in Zambeef’s debt to equity falling from 60% to 23%, and a significant increase in cash flow, Zambeef will be able to move forward growing its core cold-chain and retail business.
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Lynda Kiernan