Zambeef has announced that it has entered into a Share Sale Agreement with the Industrial Development Corporation (IDC) for the sale of 90 per cent shareholding in its wholly owned subsidiary, Zampalm Limited to the IDC for a cash consideration of US$16 million.
The US$16 million cash is to be paid on completion, with a further Performance Amount of up to US$2 million dependent on performance milestones over the three years from 2018 to 2020.
Zambeef Chairman Dr. Jacob Mwanza said the 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, cropping and stockfeed, delivered through the Group’s extensive processing, distribution and retail network.
Dr Mwanza said the deal would further allow Zambeef to continue to reduce its overall gearing, and in so doing, reduce interest costs.
Zampalm was incorporated in 2009 following Zambeef’s acquisition of Zamanita Limited in order to develop an oil palm plantation and crushing mill in Zambia as a continuation of its strategy of vertical integration.
In addition to its position as a leading edible oil and soybean meal producer, Zamanita also owned the only solvent extraction plant in Zambia.
It is estimated that 50%-70% of Zambia’s edible oil consumption of approximately 120,000 Metric Tonnes per annum is imported as finished edible oil from the Far East, East Africa and South Africa.
Zampalm was created to substitute those exports and produce palm oil entirely in Zambia for the domestic market.
Zampalm owns 20,238 Hectares of land on title in the Northern Province of Zambia, on the Eastern side of Lake Bangweulu, to the North-West of Mpika town.
Zampalm currently has approximately 413,362 palms planted over an area of 2,911 Hectares in the main plantation, with another 172,000 seedlings in the main and pre-nursery.
As at 30 September 2016, the assets of Zampalm had a book value of US$19 million, representing approximately 6.3 per cent of the Group’s gross assets.
Following the disposal of Zamanita, the Board has reviewed its strategy for Zampalm and concluded that given the long timescales required to create value from a greenfield project, it was in the best interests of Zampalm stakeholders to seek a new majority shareholder.
Zambeef will however retain a 10 per cent shareholding.