Regional seed manufacturer Seed Co Limited seeks to raise $19 million through a partial unbundling, which will also result in separate listings of its regional operations.
The seed producer wants to unbundle 71 percent of Seed Co International represented by 242 million ordinary shares.
According to a circular, Seed Co will seek shareholder approval for the proposed transaction at its annual general meeting to be held next month.
The proposed transaction is meant to mobilise capital, defend the investment already deployed in the region and fund other expansion opportunities, through a structure that will also unlock and preserve shareholder value while providing direct geographical portfolio choice for investors.
“In view of the hard currency funding needs of the group’s regional growth trajectory and the need to unlock, preserve, and grow shareholder value, the directors are proposing to partially unbundle through a dividend in specie, and separately list on the BSE the group’s regional operations which are held through Seed Co International.
“The proposed separate listing of the Seed Co International will be preceded by a capital raise of $19,22 million through a placement of Seed Co International Shares with Vilmorin & Cie SA, a related party, which capital raise is meant to address the short to medium term funding needs of the regional operations,” said Seed Co.
When completed, Seed Co Limited will retain 26 percent stake in Seed Co International.
According to the circular, the seed making company has expansion projects that require immediate funding to the tune of $31 million.
Subject to shareholder approval, directors have resolved to mobilise half of the required funding as permanent equity through the placement of 37 920 648 Seed Co International ordinary shares for subscription by Vilmorin & Cie, at a subscription price of $0,5069 per share.
“If approved by shareholders, the private placement will have a dilutive effect of 10 percent to the post partial unbundling shareholding structure of Seed Co International,” said Seed Co.
Seed Co has operations in Botswana, Kenya, Malawi, Nigeria, Rwanda, Tanzania and Zambia.
The group expects to maintain the growth momentum pushed by anticipated further market share growth in key markets particularly the East Africa with adoption of the hybrid variety on the rise in that region as well as input programmes in Zambia, Zimbabwe and Malawi.
Analysts at Akribos Research Services view the transaction as “value-accretive”.
“Overall, the transaction enhances Seed Co Limited’s equity story given the visibility and potential to access capital. We continue to view Seed Co as an attractive play to gain exposure in agriculture in Sub- Saharan Africa.
“Our thesis is supported by the strong food demand outlook in the region. Further, the stock provides exposure to high growth Sub Saharan African countries and the Limagrain partnership is set to unlock more value especially around research and development.”