CAPE TOWN - 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 15percent 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% 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% 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% of Sovereign Food’s issued shares.
Capitalworks announced up front support from shareholders holding more than 50.8% of Sovereign Food’s shares, demonstrating strong support for the offer.
The group said the offer comes at a 33.33% 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% 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.