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The proposed partial unbundling of Seed Co Limited and the subsequent separate listing of its regional operations on the Botswana Stock Exchange (BSE), will allow the company to pursue its regional expansion projects as it will be backed by the availability of solid hard currency funding.
According to an abridged circular to shareholders that was published this week on Tuesday, the regional listing will set Seed Co International on a path for exponential growth as it will allow the company to attract focused capital to recapitalise the business whenever necessary.
“In view of the hard currency funding needs of the group’s regional growth trajectory and the need to unlock, preserve, and grow shareholder value, the directors are proposing to partially unbundle through a dividend in specie, and separately list on the BSE the group’s regional operations, which are held through Seed Co International.”
As part of the expansion plans, the Private Placement and regional listing will allow the company to acquire regional seed industry players of good strategic fit in order to consolidate existing market positions. The expansion drive is also expected to go beyond Africa with planned moves into India and Pakistan making the unbundling plan important in the company’s quest to unlock shareholder value. Another plus, even for Zimbabwean shareholders, is that they are set to benefit amid plans for Seed Co International to have a secondary listing on the Zimbabwe Stock Exchange on top of the 29 percent shareholding that will remain with Seed Co Limited.
At an annual general meeting to be held next month, Seed Co will seek shareholder approval to raise $19 million through a partial unbundling.
The seed making company has expansion projects that require immediate funding to the tune of $31 million.
The group’s capital expenditure projects include warehouses and seed processing infrastructure in Tanzania, seed processing plant in Nigeria, Mkushi Farm project in Zambia, warehouse and regional offices in Botswana, warehouses in Kenya as well as research and development in South Africa.
The proposed transaction will therefore mobilise capital, defend the investment already deployed in the region and fund other expansion opportunities, through a structure that will also unlock and preserve shareholder value while providing direct geographical portfolio choice for investors.
“The proposed separate listing of the Seed Co International will be preceded by a capital raise of $19,22 million through a placement of Seed Co International Shares with Vilmorin & Cie SA, a related party, which capital raise is meant to address the short to medium term funding needs of the regional operations,” said Seed Co.
Subject to shareholder approval, directors have resolved to mobilise half of the required funding as permanent equity through the placement of 37 920 648 Seed Co International ordinary shares for subscription by Vilmorin & Cie, at a subscription price of $0,5069 per share. If approved, the seed producer will unbundle 71 percent of Seed Co International represented by 242 million ordinary shares. When completed, Seed Co Limited will retain 26 percent stake in Seed Co International.
Analysts contend the Seed Co’s transaction is a move in the right direction given the need to access a market where money can freely move to support regional growth.
“Our view is that there is value in this transaction to existing shareholders arising from the better valuation that the market is likely to place on the listed regional operations,” said stock brokers EFE Securities.
Online Reporter