SEEDCO shareholders have approved the acquisition of a 25 percent stake in the company by French based international vegetable and field developer Vilmorin & Cie acquire.
The deal is part of an unbundling exercise by SeedCo’s parent company Aico Africa.
Aico’s Chief Executive Pat Devenish said the decision to court new investors was reached after it was realised that a proposed rights offer would not be supported by shareholders.
Since the economy was formally dollarised in February 2009, almost all rights issues embarked upon by listed companies have failed to attract significant support.
Most were undersubscribed including OK Zimbabwe, NMBZ Holdings, MedTech, Art Corporation, Nicoz Diamond, African Sun, Fidelity, the collapsed CFX Financial Services, Interfresh and FBC Holdings.
SeedCo’s chief executive officer Morgan Nzwere said the rationale for the SeedCo 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.
Financial benefits of the transaction would see US$20 million going towards expensive debt reduction with potential savings of US$3 million per annum in finance costs.
A total of 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 SeedCo qualify as a farming entity and benefit from tax exemptions.
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.
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 38 million ordinary shares.
Last year local banks raised interest charges on the on the company after reviewing the group’s risk profile due to a rollover of debt.Advertisement
The move came as the seed house’s revenue for the half year to September 30 2012 plummeted by 56 percent to US$13,2 million from US$30,3 million during the comparable period the previous year.
The group, a sound performer since the economy was formally dollarization in February 2009, turned a US$509,295 operating profit during the half year to September 30 2011 into a US$7,7 million operating loss during the interim period to September 30 2012.
The company’s interest rates on loans from domestic banks had been raised from around 13 percent to 16 percent. This, Nzwere said, had swelled interest charges undermining the company’s bottom line.
SeedCo is the largest seed house in Zimbabwe, Malawi and Zambia and has a presence in 15 other countries across the continent.