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ECSPONENT LIMITED - Terms announcement in respect of an investment in Crosscorn (Pty) Ltd

Release Date: 12/12/2019 08:00
Wrap Text
Terms announcement in respect of an investment in Crosscorn (Pty) Ltd

Incorporated in the Republic of South Africa
Registration number: 1998/013215/06
JSE Code: ECS - ISIN: ZAE000179594
Debt Issuer Code: ECSD
(“the Company” or “Ecsponent”)

Terms announcement in respect of an investment in Crosscorn (Pty) Ltd

1.       Overview

The Board of Directors of Ecsponent (“the Board”) is pleased to announce that it has concluded an
agreement (“the Agreement”) with Crosscorn (Pty) Ltd (“Crosscorn”) and the Scipion Active Trading Fund
(“SATF”), a fund incorporated under the laws of the Cayman Islands, in terms of which Ecsponent will
acquire 45.5% of the common shares of Crosscorn (“the Transaction”).

2.       Description of the business of Crosscorn

Crosscorn is a Botswana domiciled company whose principal activity is the production, sale and distribution
of seeds. The company was incorporated in 2013 and has since evolved into a seed producer with a market
share in excess of 50% of the maize seed sales in Botswana. It also sells close to half of the country’s
sorghum, cowpeas and animal fodder seeds. Crosscorn is currently 100% owned by SATF, a fund managed
by Scipion Capital Ltd (“Scipion”).

3.       Rationale for the Transaction

The Board believes that the Transaction will:
     •    provide Ecsponent with an opportunity to acquire a strategic investment in Botswana, with a
          satisfactory return profile; and
     •    strengthen Ecsponent’s shareholder base while reinforcing its pan-African expansion strategy and
          unlocking value for Ecsponent in neighbouring territories.

4. Financial Information of Crosscorn

The net asset value of Crosscorn as at 30 June 2019 was BWP860 068 and the profit after tax for the year
ended 30 June 2019 was BWP633 254. Shareholders are alerted to the fact that these figures are based on
unpublished and unaudited management accounts as at that date. The management accounts were prepared
in accordance with International Financial Reporting Standards, and Ecsponent is satisfied with the quality
of the management accounts.

5.       Terms of the Agreement

5.1. Transaction structure and consideration

The common shares in Crosscorn will be acquired by Ecsponent in two phases, as follows:
-    Ecsponent will purchase 26.25% of the common shares in Crosscorn from SATF (“First Tranche
     Shares”) in exchange for a deferred cash consideration of USD1,400,000 at a fixed exchange rate of
     1 USD to 14.80 ZAR, being R20,720,000 (“Cash Consideration”). The First Tranche Shares were
     initially acquired by SATF following the conversion of a debt held by SATF against Crosscorn with a face
     value of USD1.4 million into 15,267,176 Crosscorn common shares; and
-    Ecsponent will acquire a further 19.25% of the common shares of Crosscorn from SATF, in exchange
     for the issue of 101.3 million Ecsponent shares (“Share Consideration”).

The Cash Consideration will be settled on a deferred basis, in two equal payments to SATF, one at six months
and one at twelve months after consumation of the Transaction. The outstanding Cash Consideration will
bear interest at a rate of 9.75% per annum until the date of settlement, with interest payable on a monthly

SATF will hold a pledge over the First Tranche Shares for as long as the Cash Consideration remains
outstanding, as security for the payment of the Cash Consideration.

5.2. Effective date and conditions subsequent

The effective date of the Agreement will be 31 December 2019.

The Transaction is subject to, inter alia, to the satisfaction of the following conditions precedent, on or before
30 December 2019:
     •    satisfactory completion of a legal, accounting, tax, financial, commercial and environmental due
          diligence, at the sole discretion of Ecsponent;
     •    negotiation, execution and delivery of satisfactory and mutually acceptable documents related to
          the Transaction;
     •    absence of any material adverse change in the business, results of operations, condition (financial
          or otherwise) or prospects of Ecsponent or any of its subsidiaries or Crosscorn between signature of
          the Agreement and implementation of the Transaction; and
     •    receipt of all necessary governmental, investment committee and third-party approvals.

In addition, the parties have agreed that Crosscorn will undertake an initial public offering, with the aim of
listing on the Botswana Stock Exchange within twelve months of implementation of the Transaction.

5.3. Other terms and conditions of the Agreement

The Agreement contains warranties and terms that are usual for a transaction of this size and nature.

6.    Categorisation and approvals required for the Transaction

In terms of the JSE Listings Requirements, the Transaction is categorised as a Category 2 transaction and
involves no related parties (as defined by the JSE Listings Requirements) and is accordingly not subject to
approval by shareholders.

For more information about this announcement or the Ecsponent group, email or visit

11 December 2019

Sponsor to Ecsponent
Questco Corporate Advisory (Pty) Ltd

Date: 12-12-2019 08:00:00
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