ZAMBIA – Zambeef, one of the largest integrated cold chain food producers with operations in Zambia, Nigeria and Ghana has entered into a binding Sale and Purchase Agreement (“SPA”) with Chenguang Biotech (Zambia) Agri-Dev Limited for the sale of Zambeef’s Sinazongwe Farm for a cash consideration of US$10 million.
Chenguang Biotech (Zambia) Agri-Dev Limited is a subsidiary of the Chenguang Biotech Group Co. Limited based in China (“CCGB”).
The Chenguang Group is one of the world’s leading producers and suppliers of natural plant extraction for paprika oleoresin, capsicum oleoresin and marigold oleoresin.
They also manufacture natural pigments, natural spice extracts, essential oils, natural nutrient and medicinal extracts and protein.
According to the agreement, Chenguang will pay a deposit of US$1 million, and settle the balance by completion date March 15, 2020.
The sale is conditional on gaining approval from the Competition & Consumer Protection Commission, the Lusaka Securities Exchange and Zambeef shareholders. It is also dependent on Chenguang obtaining an investment licence from the Zambia Development Agency.
Dr. Jacob Mwanza, Chairman of Zambeef, stated “This Transaction is in line with and a continuation of the Group’s strategic vision, which will allow Zambeef to focus on growing its core business, which is the production and retailing of cold chain meat and dairy products and stockfeed, delivered through the Group’s extensive processing, distribution and retail network.’’
He further added, ‘’Furthermore, the Transaction will allow Zambeef to continue to reduce its overall gearing, and in so doing, reduce interest costs.’’
Net proceeds, are expected to be around US$9.25m after payment of various regulatory and other professional fees/cost i.e. CCPC fees and ZRA PPT borne equally by both parties.
Sinazongwe Farm is made up of three land parcels comprising a total land area of approximately 2,549.8 Ha. of which approximately 1,815 Ha is developed, arable land under irrigation.
The main crops grown on the Farm are soya beans in the November to March season and wheat in the April to September season.
There is a feedlot and abattoir on the land which will separately be sub-divided and remain in the name, title and ownership of Zambeef. Chenguang will grant Zambeef free and unfettered use of up to 200,000 litres of water per day for use on Zambeef’s Feedlot and Abattoir.
Chenguang undertakes that it will retain and re-employ all local Zambian staff from the Completion Date and in this regard, on or before the Completion Date, Zambeef will lawfully terminate the employment of all the employees on the Farm. Zambeef shall pay all wages & terminal benefits due to the employees.
Sinazongwe Farm is located in the southern Zambezi valley of Zambia, along the northern shore of Lake Kariba, approximately 70 km south-east of Choma town. The farm was acquired by Zambeef in 2003 for approximately USD2.3m.
In accounts filed, for the year ending September 2018, Sinazongwe Farm generated negative EBITDA of $0.3m; was valued at $10.3m, accounting for 4% of group net asset value; and accounted for 1.7% of group revenues.
Zambeef has four farming estates/blocs i.e. Mpongwe Farm, Chiawa Farm, Sinazongwe Farm and Huntley Farm.
It Is involved in the production, processing, distribution and retailing of beef, chicken, pork, milk, eggs, dairy products, fish, flour and stock feed.
The Group also has large cereal row cropping operations (principally maize, soya beans and wheat), with approximately 7,973 hectares of row crops under irrigation, which are planted twice a year and a further 8,776 hectares of rain-fed/dry-land crops available for planting each year.