Linked In
News In
Linked In

You are viewing 1 of your 2 complimentary articles.

Register now to receive full access.

Already registered?

Login | Join us now

Zambeef shares soar more than 50%, on $65m CDC investment

Twitter Linkedin

Shares in Zambeef soared by more than 50% after the corn-to-retail group unveiled a $65m injection from the Commonwealth Development Corporation, in a deal deemed "transformational" and "extremely significant" by brokers.

Zambeef stock soared 58% to a 10-month high of 12.65p in early deals in London, before easing back to stand at 11.95p, a gain of 47%, in midday trading.

The gains followed the group's announcement that the Commonwealth Development Corporation (CDC)- a $5bn development agency, backed by the UK government, for emerging market businesses – had agreed to invest $65bn in Zambeef in return for a mixture of ordinary and preference shares.

The purchase of the, newly issued, shares will hand CDC a 17.5% stake of Zambeef's ordinary stock, but a 34.9% share of voting rights.

'Truly transformational'

The investment, termed "truly transformational" by a person familiar with the Zambian-based company, follows months of uncertainty provoked first by the devaluation of the kwacha, which inflated the burden from dollar-denominated debt, and secondly by a request by RCL Foods to be bought out of poultry joint ventures.

RCL Foods, the South Africa-based peanut butter-to-poultry supplier, in March gave notice that it was exercising put options forcing Zambeef to buy it out of the Zam Chick and Zamhatch tie-ups.

It had been assumed that Zambeef would be forced to meet the $23.4m cost of deal through issuing RCL new shares – a move which would have given the South African group a 48% stake, and in essence handed over control.

However, the CDC funds will allow Zambeef to pay off RCL in cash, besides refinance $38m in debt, and free up the group's cash for accelerating its own growth plans.

'Significant step forward'

"This is a significant step forward for our company and we are now in a stronger position than ever going forward," said Jacob Mwanza, the Zambeef chairman, adding that "we look forward to delivering healthy shareholder returns over the years ahead".

Dr Mwanza added that Zambeef had "a longstanding relationship" with CDC, which in turn has a "long history of making successful investments in our country, including plenty within the agricultural and food sectors".

CDC has also invested in Zambian agriculture through deals with the likes of SilverStreet Capital's farming arm, Silverlands Ranching, which has made a series of agricultural investments in the country.

CDC - for which the Zambeef injection represents a significant, although not unprecedented, investment – told it would likely be commenting on the deal next month, once it had been fully signed off.

Broker comment

At broker VSA Capital, analyst Ed Hugo said that the deal was "extremely significant" for Zambeef, in resolving an RCL Foods issue which "has been weighing on investor sentiment, and its share price", besides bringing the "very positive" outcome of the dollar debt refinancing.

The transaction had lifted "considerable uncertainty" from the shares, Mr Hugo said, adding that "material upgrades to consensus forecasts [for Zambeef profits are] likely due to a reduction in future interest payments".

At FinnCap, Raymond Greaves said that the "transformational" deal "could be the trigger that allows the shares to re-rate".

The investment from CDC represented "high quality solution" to what he been a "tough problem" in RCL's request to be paid out of the poultry tie-ups.

By Mike Verdin

Twitter Linkedin
Related Stories

France cuts wheat export hopes, after slowdown in shipments to non-EU buyers

The EU’s top wheat producer lowers hopes for its export recovery, noting strong competition with the likes of Argentine, US supplies for buyers

Hedge funds turn net bullish on ags - ahead of price drop to historic low

Speculators are wrong-footed in soymeal, in which they hike bullish bets just before a price tumble. But they fare better in cotton and cocoa

Evening markets: Brazilian travails send coffee, soybean and sugar futures lower

... while Canada’s crop upgrade sends wheat to a fresh contract low. But cotton spares blushes for ag bull, hitting a seven-month high

Festive staff shortages 'likely' as British growers cut ties with UK supermarkets

Faced with mounting concerns over labour shortages and fears they may not be able to fulfil retailer contracts, some British growers have sought to cut ties with UK supermarkets in favour of companies elsewhere in Europe.
Home | About | RSS | Commodities | Companies | Markets | Legal disclaimer | Privacy policy | Contact

Our Brands: Comtell | Feedinfo | FGInsight

© 2017 and Agrimoney are trademarks of Agrimoney Ltd
Agrimoney is part of the Briefing Media group
Agrimoney Ltd is registered in England & Wales. Registered number: 09239069