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RCL FOODS LIMITED - Small related party transaction

Release Date: 12/09/2019 15:18
Code(s): RCL     PDF:  
 
Wrap Text
Small related party transaction

RCL FOODS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 1966/004972/06)
ISIN: ZAE000179438
Share Code: RCL
("RCL FOODS")

SMALL RELATED PARTY TRANSACTION

BACKGROUND

Shareholders are advised that RCL FOODS and Siqalo Foods Proprietary Limited
("Siqalo") have entered into a management services agreement, in terms of which RCL
FOODS shall be appointed to manage and assist Siqalo in its day-to-day business
operations by providing agreed management services (the "MSA").

Siqalo manufactures and markets certain spreads products throughout South Africa,
Botswana, Lesotho, Namibia and Swaziland.

Remgro Limited ("Remgro") is a material shareholder of RCL FOODS and Siqalo is a
subsidiary of Remgro. As a result, the conclusion of the MSA constitutes a small related
party transaction in terms of paragraphs 10.1 and 10.7 of the Listings Requirements of
the JSE Limited ("Listings Requirements").

Vector Logistics Proprietary Limited (“Vector”), a subsidiary of RCL FOODS, will also
enter into a Services agreement with Siqalo in order to provide an integrated logistics
service to Siqalo. The agreement is in the ordinary course of Vector’s business and
therefore does not fall within the ambits of paragraph 10.1(a) of the Listings
Requirements.

THE MSA

Rationale for the MSA

The rationale behind the implementation of the MSA is for RCL FOODS to utilise its skills,
staff and facilities to manage and oversee the execution of Siqalo’s business strategy
and performance management. This will enable Siqalo’s business to follow food industry
trends, manage risk and opportunities, and facilitate engagement with key customers
and suppliers.

Terms of the MSA

The MSA is subject to the fulfilment of the condition precedent (“condition”) that the
provisions of the Listings Requirements are complied with.

In terms of the MSA, with effect from the date on which the condition is fulfilled RCL
FOODS shall be appointed to provide the agreed services, which shall be reviewed
against the agreed performance measures. RCL FOODS will have full discretion in the
performance of the services, subject to (i) the principles and policies laid down by
Siqalo’s board of directors: (ii) Siqalo’s annual budget and business plan; and (iii) the
provisions of the MSA and Siqalo’s constitutional documents. The agreed services include
Finance, Sales, Marketing, Procurement, Human Resources, Legal, Internal Audit and
Information Technology, leveraging off RCL FOODS’ existing shared services platform.

The MSA shall continue for a total period of three years.
In consideration for the services to be rendered by RCL FOODS in terms of the MSA,
Siqalo shall pay RCL FOODS a management fee of R134 million per annum, which shall
exclude VAT. The fee represents a market-related charge for the services provided.

FAIRNESS OPINION

In terms of paragraph 10.7(b) of the Listings Requirements, RCL FOODS is required to
provide the JSE with written confirmation from an independent expert acceptable to the
JSE, that the terms of the MSA are fair as far as the shareholders of RCL FOODS are
concerned ("Fairness Opinion").

RCL FOODS has engaged Ernst & Young Advisory Services (Proprietary) Limited, who
has expressed the opinion that the terms of the MSA are fair to RCL FOODS’
shareholders. The Fairness Opinion will lie for inspection at RCL FOODS’ registered office
for a period of 28 days from the date of this announcement.

Durban
12 September 2019

Sponsor
RAND MERCHANT BANK (A division of FirstRand Bank Limited)

Date: 12/09/2019 03:18:00
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