Cape Town - JSE-listed agri-investment company Zeder [JSE:ZED], which focuses specifically on the food and beverage sectors, achieved growth in its financial year to end-February 2015 with the value of its underlying investment portfolio rising by 156% from R5.2bn to R13.3bn.
At the close of business on Tuesday, March 31 2015, this value increased further to R14.1bn.
While all Zeder’s portfolio investments contributed to this figure, the achievement was spearheaded by Pioneer Foods in which the company holds a strategic interest of 27.3%. Pioneer Foods remains Zeder’s largest investment, representing 71.4% of its portfolio.
Zeder’s sum-of-the-parts value per share, calculated using the quoted market prices for all JSE-listed and liquid over-the-counter traded investments, as well as market-related valuations for unquoted, unlisted investments, lifted by 74.5% to R9.18 per share during the 12-month reported period.
At the close of business on Tuesday, March 31 2015, this sum-of-the-parts value increased further and amounted to R9.75/share. As Zeder is an investment holding company, the sum-of-the-parts is used as the main indicator of value and performance.
Recurring headline earnings per share lifted by 15.4% to 35.3 cents during the period under review. This followed from strong contributions by underlying portfolio companies, with the aggregate recurring headline earnings derived by Zeder from these investments rising by 47.7%.
Headline earnings per share dropped by 17.3% to 22c. This was mainly due to an increase in the deferred purchase consideration paid by Capespan for its investment in Golden Wing Mau in China, as a result of this investment performing significantly better than originally forecast.
The fall was also due to the accounting effect of the black economic empowerment transaction on Pioneer Foods results, given the significant increase in the Pioneer Foods share price.
A final dividend of 5.5c/share - compared to 4.5c/share in 2014 - was declared, representing an increase of 22.2%.
Announcing the results, Zeder CEO Norman Celliers said the period under review could be considered a watershed year for the company.
“We now have a very strong balance sheet resulting from our portfolio optimisation strategy where we have selectively focused on core investments and derived appropriate transactions to unlock shareholders' value to the maximum over the past 24 months,” he said.
Biggest deal in its history
Zeder concluded the largest transaction in its history during the period under review by acquiring all of the outstanding shares in Agri Voedsel and merging it with Zeder. The net result was the effective acquisition of an additional direct interest of 13% in Pioneer Foods, through a transaction valued in excess of R2.5bn at the time.
Given the strong performance in Pioneer Foods share price since then, this additional interest is now valued at R4.9bn.
Pioneer Foods in turn also completed the separate listing and unbundling of Quantum Foods. These transactions ensured that all remaining structural discounts have been removed and Zeder now holds its shares in both Pioneer Foods and Quantum Foods directly via the JSE.
“Over the last two years we followed a refined strategy of internal focus with our attention mainly on existing portfolio companies. This consisted of seeking larger, strategic stakes in entities to allow us to play a more active role and to assist with the determination of appropriate long-term strategies to help expand the respective businesses,” said Celliers.
“This portfolio optimisation process has progressed very well with the core portfolio companies delivering strong results, while at the same time having been positioned for sustainable growth.”
He said going forward the focus will largely remain on the existing portfolio, but will include a focus on growth from within the portfolio companies, while making strategic additions when the opportunities and values are attractive.
Zeder also announced its firm intention to make an offer to minority shareholders in Capespan, through which the company will seek to acquire all of the remaining 25% shares in Capespan, excluding the shares held by management.
Zeder intends to offer 85 Zeder shares in exchange for every 100 Capespan shares as purchase consideration. At current market prices the offer values Capespan shares at R6.50 to R7.00/share, representing a premium in excess of 65% over the average traded price for Capespan shares.
“Zeder and management currently already own about 75% of Capespan. The remaining shares are held by a large group of small shareholders and, therefore, Capespan is basically controlled by Zeder and management," said Celliers.
“As Zeder has no intention of listing Capespan in the near future, Zeder would like to offer minority shareholders in Capespan the option to exchange their unlisted, illiquid shares for Zeder shares, thereby solving the liquidity problem they currently face, while also benefiting from a more diversified exposure through Zeder.”
He further commented that Zeder believes the offer is made at a substantial premium and trusts Capespan shareholders will consider the offer favourably.
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