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RAINBOW — ACQUISITION OF FOODCORP

Rainbow shareholders are advised that RCL and Capitau FC Investment (Pty) Ltd. (“CIM SPV”), an entity under the management of Capitau Investment Advisory (Pty) Ltd. (“Capitau”) have entered into an arrangement in terms of which they have agreed to acquire 76.1% of the ordinary share capital in Foodcorp through Capitau Investment Management Ltd. (“CIM”) and Rainbow will acquire 84.3% of the issued ordinary shares of CIM, which will result in RCL effectively owning 64.2% of the issued ordinary share capital of Foodcorp (the “transaction”). Foodcorp management will retain a 23.9% holding in the company and will continue to manage the company following the implementation of the transaction.

Business of Foodcorp
Foodcorp is a leading South African manufacturer of quality branded and private label food products. The company manufactures, markets and distributes a diversity of food products ranging from basic essentials to top end desserts and convenience meals.

Foodcorps range of products is among the leading and best recognised brands in South Africa. These include Yum Yum peanut butter, Ouma Rusks, Pieman’s meat pies, Sunbake bread and bakery products, Bobtail and Dogmor pet foods, Nola mayonnaise and the popular maize drink, Mageu No 1. The company also manufactures and sells a wide range of quality convenience, ready-to-eat products for Woolworths and other retailers.

Foodcorp positions its products to appeal to the mass consumer market in South Africa and supplies most of it nationally to major retail outlets, food wholesale outlets, independent retailers, forecourts and the food services industry. It also exports certain products, principally to the rest of Africa.

The business typically sells around 200 million loaves of bread, 280 000 tons of flour, 120 million pies and 60 million litres of Mageu No.1 a year. Revenue and EBITDA for the year ended 31 August 2012 amounted to R6.9 billion and R773 million, respectively.

Transaction structure
In terms of agreements entered into by Rainbow with:
*BlueBay Asset Management LLP (“BlueBay”), in its capacity as agent of BlueBay Funds – BlueBay High Yield Bond Fund; BlueBay Structured Funds: High Yield Enhanced Fund; BlueBay Specialised Funds: Credit Opportunity (Master) Fund; BlueBay Funds – BlueBay High Yield Corporate Bond Fund; The BlueBay Distressed Opportunities (Master) Fund Ltd.; BlueBay Funds – BlueBay Global High Yield Bond Fund; and BlueBay Structured Funds: High Yield Institutional Credit Select Fund, Rainbow has agreed to purchase the 378 751 (three hundred and seventy eight thousand seven hundred and fifty one) ordinary shares in Foodcorp (“Foodcorp Shares”) held by the BlueBay Funds (amounting to 46.0% of the issued ordinary share capital of Foodcorp);
*the Foodcorp Employee Share Trust, Rainbow has agreed to purchase the 185 000 Foodcorp Shares held by the Foodcorp Employee Share Trust (amounting to 22.5% of the issued ordinary share capital of Foodcorp); and
*Foodcorp Management Holdings (Pty) Ltd., RCL has agreed to purchase the 23 810 Foodcorp Shares held by Foodcorp Management Holdings (Pty) Ltd. (amounting to 2.9% of the issued ordinary share capital of Foodcorp).

These agreements will hereinafter be collectively referred to as the “Sale Agreements”. RCL has further agreed to assign its rights and obligations under the Sale Agreements to CIM. In addition, CIM SPV has agreed to acquire all the Foodcorp Shares held by the Capitau managed entities (amounting to 4.7% of the issued ordinary share capital of Foodcorp).

Immediately prior to the implementation of the acquisition of the Foodcorp Shares:
*Rainbow will subscribe for 84.3% of the ordinary share capital of CIM for a nominal subscription consideration and for preference shares in the share capital of CIM (“preference shares”) for a subscription consideration of R1 037 million which will carry a dividend yield equal to the prime lending rate of FirstRand Bank Ltd.; and
*CIM SPV will subscribe for ordinary shares in CIM for a nominal subscription consideration and will, together with Capitau Holdings Ltd., hold the remaining 15.7% of the ordinary share capital of CIM. CIM SPV will contribute its 4.7% interest in Foodcorp in exchange for Preference Shares to the value of R71 million and will subscribe for additional Preference Shares at a subscription consideration of R36 million.

CIM will utilize the cash proceeds from the preference shares issued to Rainbow and CIM SPV to settle the purchase consideration payable in respect of the Foodcorp Shares. Upon successful completion of the transaction, CIM will own 76.1% of the issued ordinary share capital of Foodcorp and RCL will own 84.3% of the share capital of CIM and an effective 64.2% of Foodcorp. The remaining shares in CIM will be held by the CIM SPV together with Capitau Holdings Ltd. The risks and benefits of ownership will pass with effect from 1 September 2012. Please refer to www.jse.co.za for PDF version of this announcement to view the diagram.

Rainbow will conduct a rights offer fully underwritten by Remgro Ltd. to fund the Transaction. Full details of the offer will be communicated to shareholders in due course.

Conditions precedent
The transaction is subject to the fulfilment or waiver, as the case may be, of inter alia the following conditions:
*the approval of the transaction by the Competition Tribunal in terms of the Competition Act 89 of 1998, as amended, either unconditionally or subject to conditions reasonably acceptable to the person on whom such conditions are imposed;
*the approval of the transaction by the Financial Surveillance Department of the South African Reserve Bank; and
*all other regulatory approvals required by law to give effect to the transaction.