Agribusiness company Zeder Investments intends to return up to R4.75bn to shareholders from the proceeds of the mooted sale of Pioneer Foods to PepsiCo.
Zeder, which has a 28.6% interest in Pioneer, has backed the R24.4bn deal in which PepsiCo has made an all-cash offer to buy 100% of the Pioneer ordinary shares for R100 per share.
Zeder invests in agribusinesses with a focus on the food and beverages sectors. The stake in Pioneer is Zeder’s largest investment, representing 51.2% of its portfolio.
At the end of August, Zeder’s total investment portfolio was worth R12bn. Other than Pioneer Foods, the company has interests in Quantum Foods, Kaap Agri and Agrivision Africa.
CEO Norman Cilliers said on Tuesday that Zeder shareholders approved the transaction in September and would vote in favour of the acquisition at a Pioneer meeting on October 15.
“This is a good deal. Our country needs foreign direct investment at the moment,” Cilliers said.
At the proposed R110 per share, Zeder said it expects to receive about R6.4bn.
Speaking after the release of the company’s results for the six months to August, Cilliers said the company would distribute between R4.25bn and R4.75bn of the proceeds to shareholders. “We felt that is a lot of cash to keep. We will retain sufficient cash to pursue new opportunities or [ones] in the existing portfolio,” he said.
In the six months, Zeder’s recurring headline earnings per share decreased 63% to 3.6c. The company attributed the fall in earnings mainly to the weaker performance of most of its investments.
Zeder did not declare an interim dividend. The group’s policy is to only pay a final dividend at year-end.
“Looking at Zeder’s interim results, it is clear that the underlying hangover from the devastating drought that impacted SA in the last few years continues to rumble on in the agricultural hinterland, hence the 63% decline in like-on-like earnings,” analyst Anthony Clark of Small Talk Daily said.
Pioneer also took strain from the weak domestic economy, which affected consumer demand, Clark said.
He said Zeder’s listed investments, other than Pioneer, were either poorly understood or illiquid. The Western Cape-based Kaap Agri, which is worth R1bn of Zeder’s portfolio, was highly illiquid “and has had a poor performance due to the Western Cape droughts”, he said.
Quantum Foods, the other listed entity, was worth R225m. “It is a relatively small asset. Much of the other investments — Zaad, Capespan and the logistics companies — are misunderstood and, like-on-like, have had minimal change in the underlying valuations,” Clark said.
Agrivision Africa, in which Zeder has a 56% stake, had been a disaster, said Clark. Agrivision owns and operates large-scale commercial farming operations and a milling business in Zambia.
In the six months, the underlying valuation of Agrivision was decreased by 19% to R398m. In the last two years, the valuation of that asset has fallen by more than a third and there have been consistent write-downs.
At its peak, Agrivision was worth R620m; it is now worth R398m. “When will Zeder’s portfolio be cleaned up? When will long-suffering shareholders actually see some value? That is the key question for the 2020 financial year,” Clark said.
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