Zimbabwe’s largest seed maker Seed Co Limited’s partial unbundling comes to fruition today (October 5) with the primary listing of spin-off Seed Co International on the Botswana Stock Exchange (BSE).
Seed Co International will also get a secondary listing on the Zimbabwe Stock Exchange (ZSE), where the parent company already trades.
According to a circular issued to shareholders, the spin-off’s will list on the BSE by introduction of its entire issued share capital comprising 379 331 127 ordinary shares. And its secondary listing on the ZSE will be by the listing of issued shares of the company comprising 379 331 127 ordinary shares of no par value on the ZSE.
Full fungibility not guaranteed
The giant seed producer says there could be limited cross movement of Seed Co International ordinary shares particularly from the ZSE to the BSE.
“While some restrictions will apply in respect of the movement of Seed Co International ordinary shares by Zimbabwean resident shareholders from the ZSE to the BSE, Seed Co International ordinary shares shall move freely from the BSE to the ZSE.
“The restrictions on the movement of Seed Co International ordinary shares from the ZSE to the BSE shall be monitored by the Zimbabwean Transfer Secretaries in liaison with the stock brokers in Zimbabwe.
“Accordingly, Zimbabwean resident shareholders are advised to consult their stock brokers and the company’s Zimbabwe transfer secretaries for permissibility and conditions each time they consider moving their Seed Co International shares from the ZSE for trading on the BSE,” said the group.
The capital raise
Meanwhile, the unbundling and partial listing will result in the group managing to raise $19,22 million to partially fund its expansion projects.
Following the process Seed Co Limited will retain a 26 percent stake in Seed Co International.
In an earlier pre-listing statement, the group said the capital raise process will be three-prong.
It will entail the following: Partially unbundling Seed Co International Limited out of the group by way of a pro rata dividend in specie distribution of 71 percent of Seed Co International Limited represented by 241 313 440 ordinary shares which are part of the total shares held by Seed Co Limited; the raising of approximately $9,2 million (3,6 percent of current market capitalisation of $532 million) hard currency through the placement of 37 920 648 Seed Co International Limited ordinary shares with Vilmorin & Cie at a subscription price of $0,5069 per share; and the separate primary and secondary listing of Seed Co International Limited on the BSE and the ZSE.
“Seed Co International has expansion projects that require immediate funding amounting to approximately $31 million.
“In order to manage leverage and the attendant financial risk, the 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, a related party, at a subscription price of $0,5069 per share.”
The private placement will have a dilutive effect of 10 percent to the post partial unbundling shareholding structure of Seed Co International.
It is expected that the capital raised will be directed towards satisfying regional market acquisitions and capex programs in Tanzania, Nigeria, Zambia, Botswana and Kenya.
And the listing on BSE will provide the visibility the group requires and also a vehicle for offshore fund raising.
A value-accretive transaction
Analysts at Akribos Research Services view the transaction as “value-accretive”.
“Based on our assessment of the proposed transaction, we would recommend shareholders vote in favour of the transaction given that it is value-accretive.
“Shareholders will maintain their investment in Seed Co Limited while at the same time benefit from the regional equity platform that has been created through Seed Co International.
“The capital raising via the private placement of $19,2 million demonstrates the confidence that the strategic partner (Vilmorin & Cie) has in the international growth strategy.
“In addition, the subscription price of $0,5069 per share is at a significant premium (103 percent) to NAV of $0,25 per share,” said Akribos in a research note.
“Overall, the transaction enhances Seed Co Limited’s equity story given the visibility and potential to access capital. We continue to view Seed Co as an attractive play to gain exposure in agriculture in sub- Saharan Africa.
“Our thesis is supported by the strong food demand outlook in the region. Further, the stock provides exposure to high growth SSA countries and the Limagrain partnership is set to unlock more value especially around R&D. Seed Co tends to have lower capex demands and high returns where compared to pure Agriculture plays in the region such as Zambeef.”