Wrap Text
Acquisition of the fishing business of viking fishing and 51% of the shares of viking aquaculture
SEA HARVEST GROUP LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 2008/001066/06)
Share code: SHG ISIN: ZAE000240198
("Sea Harvest" or the “Company” or the “Group”)
ANNOUNCEMENT RELATING TO THE ACQUISITION OF THE:
- FISHING BUSINESS OF VIKING FISHING HOLDINGS PROPRIETARY LIMITED;
- 51% OF THE SHARES OF VIKING AQUACULTURE PROPRIETARY LIMITED; AND
- WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
1. Introduction
The board of directors of Sea Harvest (the “Board”) is pleased to advise shareholders that:
- a consortium of broad-based black economic empowerment (“B-BBEE”) investors led by
Sea Harvest, together with its wholly-owned subsidiary Sea Harvest Corporation Proprietary
Limited (“Sea Harvest Corporation”), have entered into sale agreements with Viking Fishing
Holdings Proprietary Limited (which is controlled by Odin Investments Proprietary Limited, the
Viking Staff Share Trust, the Viking Social and Upliftment Trust, Redburg Investments
Proprietary Limited (“Redburg Investments”) and RWFT Investments Proprietary Limited)
and certain of its subsidiaries and joint ventures (which include Longline Fishing Proprietary
Limited, Gerombe Fishing Enterprises Proprietary Limited and Ziyabuya Fishing Company
Proprietary Limited) (collectively “Viking Fishing”) to acquire the fishing business of, and
selected shareholdings in, Viking Fishing (the “Fishing Acquisition”); and
- Sea Harvest Aquaculture Proprietary Limited (“Sea Harvest Aquaculture”), a wholly–owned
subsidiary of Sea Harvest, has entered into a share purchase agreement with Viking Group
Administration Proprietary Limited (“Viking Group Admin”), Redburg Investments and the
trustees for the time being of the Rory Williams Family Trust ("RW Family Trust") to acquire
51% of the issued share capital of Viking Aquaculture Proprietary Limited (“Viking
Aquaculture”) (the “Aquaculture Acquisition”),
the Fishing Acquisition and Aquaculture Acquisition, collectively referred to as the “Proposed
Transaction”.
In addition to Sea Harvest, Sea Harvest Corporation and Sea Harvest Aquaculture, the remaining
parties to the B-BBEE consortium comprise:
- Nalitha Investments Proprietary Limited (“Nalitha”);
- SeaVuna Fishing Company Proprietary Limited (“SeaVuna”); and
- South African Fishing Empowerment Consortium Proprietary Limited (“SAFEC”),
(collectively the “B-BBEE Consortium”), further details of which are set out in paragraph 4 below.
The Proposed Transaction is subject to the suspensive conditions set out in paragraph 6 below.
2. Overview of the Viking Group
Viking Fishing and Viking Aquaculture (together the “Viking Group”) was founded by Nico Bacon
in 1978 and has developed into a significant vertically integrated fishing and aquaculture business
over the last 40 years. The group employs more than 1,600 people.
Viking Fishing operates a fleet of 30 vessels from Cape Town, Hout Bay, Mossel Bay, Durban
and Maputo. The company catches, processes and markets a diverse range of species including
hake, horse mackerel, small pelagics (pilchards and anchovy), west coast rock lobster, prawns
and tuna pole. Viking Fishing operates six processing facilities and markets its products in South
Africa, Europe and Asia across the wholesale and foodservice channels.
Viking Aquaculture is one of the largest diversified aquaculture producers in South Africa, farming
abalone, mussels, oysters and trout across a number of locations in South Africa and Namibia.
3. Rationale for the Proposed Transaction
Following its listing on the JSE Limited (“JSE”) on 23 March 2017, Sea Harvest has actively
sought to grow via acquisitions in the fishing and aquaculture sectors in line with the Company’s
strategy and vision of becoming one of the largest black owned diversified global seafood and
food companies.
The acquisition of the Viking Group fits the Group’s investment criteria and Sea Harvest is
confident of the value that a combination of Sea Harvest and the Viking Group would generate
through:
- the complementary nature of the fishing businesses; and
- the diversification into other wild caught species and aquaculture.
The Proposed Transaction will have a positive impact on the fishing industry in South Africa as it
will:
- significantly increase black ownership in the fishing industry due to the strong transformation
credentials of Sea Harvest and the B-BBEE Consortium;
- ensure the preservation of 1,600 jobs, 90% of which consists of historically disadvantaged
individuals, particularly in the ports of Mossel Bay, Saldanha Bay and Cape Town and the
rural communities of Kleinzee and Gansbaai;
- introduce two new Small, Medium and Micro-sized Enterprise (“SMME”) players into the
fishing industry;
- contribute to the establishment and furtherance of sizeable operational black industrialists and
new black entrants in the fishing industry; and
- contribute to inclusive economic growth and participation through access, diversity,
empowerment and transformation in the mainstream South African economy.
4. Details relating to the B-BBEE Consortium
In view of the size, complexity and geographic footprint of the Viking Group’s operations, it has
been determined that the Proposed Transaction is one best undertaken by the B-BBEE
Consortium.
SeaVuna, a wholly-owned subsidiary of Vuna Fishing Company Proprietary Limited, is an industry
leading black owned fishing and processing operation which currently holds fishing rights in the
hake fishery and operates a fleet of its own fishing vessels from Mossel Bay, where it lands fish
for value-adding in its fish processing establishment.
Nalitha is a 100% black owned and managed new black industrialist. Nalitha is a new entrant to
the fishing industry and is led by a seasoned industry managing director, with experience in the
food and fishing industry.
SAFEC is a 100% black owned and managed new entrant into the fishing industry controlled by
three community based companies from the Western Cape, Eastern Cape and Kwa-Zulu Natal
respectively, as well as a charitable trust.
5. Salient features of the Proposed Transaction
5.1 The Fishing Acquisition
The B-BBEE Consortium have entered into various agreements to acquire the fishing
business of Viking Fishing by way of the purchase of selected assets, businesses and
shareholdings in, and the assumption of certain third party debt, trade creditors and liabilities
in and from, Viking Fishing.
5.2 The Aquaculture Acquisition
Sea Harvest Aquaculture has entered into a share purchase agreement to acquire 51% of the
issued share capital of Viking Aquaculture from Viking Group Admin, Redburg Investments
and the RW Family Trust.
5.3 Purchase Consideration
The total maximum purchase consideration payable by the B-BBEE Consortium for the
Proposed Transaction is R884,673,446 (the “Purchase Consideration”). The Purchase
Consideration is to be settled by the B-BBEE Consortium through a combination of cash on
hand, bank facilities, an issue of Sea Harvest ordinary shares and vendor funding as follows:
by way of an upfront payment (as the "Initial Consideration"):
5.3.1 R565,000,761 for the Fishing Acquisition to be settled on the Closing Date (as
defined in paragraph 6 below) by way of:
5.3.1.1 R315,000,761 in cash; and
5.3.1.2 the issue of 19,230,769 Sea Harvest ordinary shares of no par value
(to be issued at an agreed price of R13.00 per share equating to
R250,000,000);
5.3.2 R64,604,890 for the Aquaculture Acquisition to be settled in cash on the Closing
Date; and
5.3.3 vendor funding in an amount of R56,267,795,
subject to adjustment as follows (as the "Contingent Consideration"):
5.3.4 a maximum amount of R198,800,000 will be payable as an upwards adjustment to
the Initial Consideration depending on the profit-after-tax generated by the Viking
Group for each of the two financial years ending 31 December 2018 and 31
December 2019 respectively, and certain profit warranties being achieved, which (if
payable) will be settled in three tranches:
o a maximum of R44,400,000 in cash, post the 31 December 2018
financial year-end audit;
o a maximum of R44,400,000 in cash, post the 31 December 2019
financial year-end audit; and
o a maximum of R110,000,000 in cash on 1 January 2022.
The portion of the Purchase Consideration attributable to Sea Harvest for the Proposed Transaction
will be a maximum of R763,405,650 consisting of a portion of the Initial Consideration amounting to
R564,605,650 and the maximum Contingent Consideration of R198,800,000.
In order to expedite and promote existing black participants and SMME”s as well as the introduction
of new black entrants, black industrialists and enterprise development in the fishing industry, the
vendors and Sea Harvest Corporation have undertaken to assist SeaVuna, Nalitha and SAFEC by
extending to them vendor funding and loans to fund their share of the Purchase Consideration for an
amount of R124,267,795 (which amount is inclusive of an amount of R3,000,000 in excess of the
Purchase Consideration related to VAT payable).
6. Suspensive Conditions
The Proposed Transaction, the substance and form of which will be embodied in the transaction
documents, is subject to the fulfilment or waiver (if applicable) of, among other things, the
following suspensive conditions:
- approval of the Competition authorities, noting that the Competition Commission has
recommended to the Competition Tribunal that the Proposed Transaction be approved
subject to a condition restricting the exchange of competitively sensitive information
between Sea Harvest and Oceana Group Limited via their common shareholder;
- Department of Agriculture, Forestry and Fisheries (“DAFF”) providing approval for the
transfer of the fish processing establishments (DAFF has already approved the transfer of
the fishing rights);
- approval of counterparties to material contracts of the target companies and assets;
- no material adverse change in regard to the Viking Group occurring between the effective
date and the date upon which all of the other suspensive conditions are fulfilled or
waived.
The closing date of the transaction will be the start of business on the first business day of the
month following the month in which all of the suspensive conditions are fulfilled or waived (or such
other closing date as may be agreed on in writing by the parties), which is expected to be on or
about 2 July 2018 (the “Closing Date”).
7. Net assets and attributable profits
The assets to be acquired by the B-BBEE Consortium are being sold by various legal entities
within the Viking Group and are separately identifiable, with financial information available to
separately present the carrying value of the assets to be acquired by the various members of the
B-BBEE Consortium. However, the operations of the group are managed as a single business
with no allocation of revenues, costs or profits to specific assets. As a result, historical financial
information is not available in order to separately present the earnings attributable to the specific
assets and liabilities acquired by each member of the B-BBEE Consortium.
The profit after tax attributable to the selected business assets and liabilities acquired by the B-
BBEE Consortium from the Viking Group for its financial year ended 31 December 2017, was
R192,137,721. The proportionate share of the Purchase Consideration attributable to Sea
Harvest is broadly indicative of its share of the attributable profit after tax set out above.
The B-BBEE Consortium is to acquire from Viking Group attributable business assets and
liabilities with a historical reported value reflecting liabilities that exceed assets by R149,840,958
at 31 December 2017, being the date of its last annual financial statements, of which Sea Harvest
is to acquire business assets and net liabilities with a historical reported value reflecting liabilities
that exceed assets by R159,693,899.
The attributable net liabilities acquired comprise of fishing vessels, property, plant and equipment,
biological assets, fishing rights, inventory, trade receivables, trade payables and third party debt.
The audited annual financial information of the Viking Group, from which the attributable profits
and net liabilities were extracted and calculated, were prepared in accordance with International
Financial Reporting Standards. For two smaller entities forming part of the Proposed Transaction,
historical financial information was extracted from the unaudited management accounts. Sea
Harvest is satisfied with the quality of the audited financial information of the Viking Group and the
management accounts of the two smaller entities referred to above, however, shareholders
should note that the fair value of assets acquired are different to the historical accounting carrying
values, particularly for fishing rights, vessels and property, plant and equipment.
8. Categorisation
The Proposed Transaction is classified as a Category 2 transaction for Sea Harvest in terms of
the Listings Requirements of the JSE.
9. Subsidiary to adopt compliant Memorandum of Incorporation
Viking Aquaculture will become a subsidiary of Sea Harvest and will adopt a new memorandum of
incorporation in compliance with the provisions of the Listings Requirements of the JSE.
10. Withdrawal of cautionary announcement
Sea Harvest shareholders are advised that further to this announcement which sets out the full
terms of the Proposed Transaction, caution is no longer required to be exercised when dealing in
Sea Harvest’s securities.
Cape Town
13 June 2018
Corporate Advisor and Transaction Sponsor to Sea Harvest
PricewaterhouseCoopers Corporate Finance Proprietary Limited
Legal Advisor to Sea Harvest
Webber Wentzel
Investment Bank and Sponsor
The Standard Bank of South Africa Limited
Legal Advisor to Sea Harvest on funding
Cliffe Dekker Hofmeyr
Financial Advisor to Viking Fishing and Viking Aquaculture
Investec Bank Limited
Legal Advisor to Viking Fishing and Viking Aquaculture
Dawson, Edwards & Associates
Date: 13/06/2018 09:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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