Shareholders in one of Zambia’s largest integrated food companies, Zambeef Products (Zambeef) recently voted in favour of the company buying back its poultry business’s shares from joint venture partner, RCL Foods (RCL).
In 2013, South Africa-headquartered food-producing company, RCL, entered into a joint venture agreement with Zambeef. Initially, this included operating a broiler production division, Zam Chick.
Subsequently, it also included the establishment of a greenfield broiler hatchery, Zamhatch. Zambeef owns 51% and 49% of Zam Chick and Zamhatch respectively, while RCL owns 49% and 51% of Zam Chick and Zamhatch respectively.
As a standard protection mechanism, RCL was granted ‘put’ options, which required Zambeef to acquire all shares in Zam Chick and Zamhatch if RCL decided to exercise these options within three years of entering the venture. Earlier this year, RCL chose to exit the partnership.
“Options available to Zambeef shareholders were either to raise the cash to pay RCL Foods for its shares in Zam Chick and Zamhatch, or to offer RCL Foods shareholding of an equivalent value in Zambeef. Zambeef’s shareholders elected to raise the cash to buy our shares. RCL Foods is not unhappy with the outcome as it stands,” said RCL’s CFO, Rob Field.
Zambeef reported that its shareholders had earlier approved a deal to raise US$23 million (R335 million) to buy RCL’s shares in the poultry operations. The Zambian company added that it had been able to raise the funds through the issue of new, ordinary shares, and convertible preference shares offered to the development finance institution, CDC Group (CDC).
“We thank all our shareholders for their continued support for Zambeef. It is a measure of CDC’s confidence in Zambeef, its management and business model that one of the world’s most well-respected and prudent investment houses has opted to invest in the company,” said Zambeef’s chairperson, Dr Jacob Mwanza.
Field told Farmer’s Weekly that while RCL had withdrawn from its relationship with Zambeef, it had not exited the Zambian market. “We will reinvest in the Zambian market when opportunities arise,” he said.