South African agricultural and diversified foods group Afgri received shareholder approval on Tuesday for the proposed R2.4-billion buyout by JSE-listed AgriGroupe Holdings.

AgriGroupe planned to acquire all shares in Afgri, at R7 a share, in a scheme of arrangement representing a premium of 49% to the volume-weighted average share price of R4.70 for the 30 trading days prior to Afgri’s cautionary announcement on September 6, and a 22% premium to the 52-week high of R5.75.

The offer represented 19.6 times the diluted headline earnings a share for the year to June and a 25% premium to the tangible book value a share of R5.59 as at the financial year end.

The deal was expected to bring in “well over” $100-million in new capital into the country and would provide Afgri with the boost it needed to support its existing business and growth plans in South Africa.

“AgriGroupe remains committed to supporting the best interests of Afgri and [its] valued stakeholders, including the more than 7 000 farmers, 4 500 employees and millions of consumers it currently serves, and ultimately the long-term food security interests of South Africa and the African continent,” AgriGroupe said in a statement.

AgriGroupe would support its newly acquired subsidiary’s strategic plans to strengthen small farmer development in South Africa through extensive training, technology, equipment and access to credit.

To this end, AgriGroupe aimed to provide a stronger capital base for
Afgri to compete effectively in a significantly changing market, while ensuring its current management structure and long-term business strategy remained intact.

Further, AgriGroupe believed a significant growth opportunity for Afgri was its extensive supply chain and ability to deploy its comprehensive grain-management solutions and expertise in selective attractive markets in Africa.

The continent could potentially increase the value of its current agricultural yearly output from $280-billion to $500-billion a year by 2020, and $880-billion a year by 2030.

But sector transformation, in which Afgri could play a significant role, and significant, long-term capital expenditure and management resources, which AgriGroupe was prepared to provide, was critical to exploiting this opportunity.

As the transaction closed in the first quarter of 2014, subject to the competition authorities' approval, besides others, AgriGroupe planned to secure an additional black economic-empowerment (BEE) partner for the new acquisition.

A memorandum of understanding between the company and potential participants in the investment, BEE consortium Bafepi Agri and the Public Investment Corporation (PIC) was signed.

The parties expected to finalise these investments in the next few weeks.

“This new BEE ownership will be in addition to the 26.77% of Afgri Operations held by Afgri’s Izitsalo Trust on behalf of the company’s black employees, which will be maintained, thereby making Afgri one of the most empowered companies in South Africa, ensuring that the majority of the economic benefits of Afgri remain within South Africa for the benefit of South Africans,” AgriGroupe explained.

Bafepi's transformation model and expertise would be rolled out nationally, prioritising the areas in which Afgri operated.

“This cooperative model, together with Afgri’s grain-handling expertise, will enable Afgri to aggregate the crop produced by black farmers and facilitate a more efficient trading market. Successful deployment will help create jobs and enhance entrepreneurship among black farmers, thereby stimulating rural development,” the group concluded.