Zimbabwe: Seed Co Ltd and Vilmorin strike $60m deal

Shareholders in Zimbabwe’s largest seed manufacturer Seed Co Ltd approved a US$60 million deal which will see French based international field and vegetable seed developer Vilmorin & Cie acquire a 25% equity stake in the local company by the end of 2014. CEO Morgan Nzwere described this as the biggest deal on the Zimbabwe Stock Exchange since dollarisation.

He said the rationale for the transaction was to increase the company’s breeding, research, training and development expertise while also availing fresh and appropriately priced capital to finance growth in new and existing markets, particularly in East and West Africa.

The company’s circular to shareholders indicated equity capital amounting to US$40,1 million will be raised through the issue to Vilmorin & Cie S.A of up to 37, 662, 481 new ordinary shares at a subscription price per share of US$0, 9925 immediately after the EGM, subject to regulatory approval, in two tranches.

Nzwere said Seed Co would benefit from joint research board and activities, germplasm exchange, technology transfer where the partner will provide field trials and bursaries, molecular market analysis, among other things.

Financial benefits of the transaction will see US$20 million going towards expensive debt reduction with potential savings of US$3 million per annum in finance costs.

Nzwere said US$6 million would go to the construction of a factory and offices in Malawi which will save the company US$500, 000 annually in rental costs. Another US$6 million will go towards the purchase of a farm for own production of seeds, leading to a reduction in production costs by close to US$1 million as well as increased tax savings in Zambia as the move will make Seed Co qualify as a farming entity and benefit from tax exemptions.

Nzwere said US$8 million would be invested in West Africa and Ethiopia where a possible 15 000 metric tonnes would be sold in the next three to five years. “We want to invest in East and West Africa and those businesses could end up adding US$3 million to the bottom line in the medium to long-term,” Nzwere said.

Please click here for the full article, including more detailed information regarding project phases.

Source: theindependent.co.zw

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