SEED CO will raise a total of $40 million fresh capital after selling a 25 percent stake to New York Stock Exchange-listed seed firm Vilmorin and Cie SA in a technical and equity partnership deal.
Its parent firm, Aico Africa Limited, will sell part of its controlling stake, representing 10 percent of the seed house's equity, to the US registered seed company. As such, the initial placement of the shares and the sale of part of Aico's stake will result in the American company acquiring a total of 15 percent equity in the local seed firm.
It will acquire a further 10 percent after a second placement. Seed Co, which has a presence in 15 African countries and is the largest seed house in Zimbabwe, Malawi and Zambia, will issue 10 273 048 new shares while its parent Aico will sell off 20 46 096 shares in the first transaction that will raise $10,2 million.
Seed Co will on the same date grant its strategic global partner call option to purchase a further 27 389 433 ordinary shares within 12 months of the conclusion of the first transaction.
After conclusion of the first and second share placements and the sale of Aico's stake to Vilmorin, a unit of global agriculture co-operative group Limagrain, Seed Co's ordinary shares will increase from 195 171 678 to 232 834 159.
The seed producer will, however, need to first obtain shareholder approval for the transactions at an extraordinary general meeting that has been penciled in for October 30, 2013.
Shares issued and sold under the first transaction will be subscribed for at $0,9925 per share while the price will be increased to $1,0912 per share in the second transaction to raise a total of $29,9 million.
"On conclusion of tranche 1 placement and the Aico sale the strategic global partner will control approximately 15 percent of the issued share capital of Seed Co," Seed Co said in a statement.
"On fully exercising the call option in respect of tranche 2 placement and following the Aico sale, the strategic global partner will control approximately 25 percent of the issued share capital of Seed Co."
The Zimbabwean company said the rationale behind the proposed transaction is to increase the company's breeding, research, training and development expertise while raising capital to fund growth and retire expensive debt.
This has become critical to maintain or grow market share on the African seed market that has been invaded by two of the leading global seed giants namely Pioneer DuPont and Syngenta.
Seed Co said apart from the benefits deriving from the strategic capabilities of Vilmorin and Cie, the proposed partnership will go a long way in addressing the firm's short- and medium-term financing needs.
The company requires fresh finance to reduce debts in Zimbabwe, which saw interest burden balloon to $7 million by March 31, 2013, and $6 million acquisition of a new farm in Zambia.
The company also requires $6 million for construction of a factory, warehouse and offices in Malawi where it is renting premises at $400 000 per year.
Seed Co requires $8 million for equipping operations in Ethiopia and West Africa since the company believes that it would not be viable to export to these markets.
Failure to implement the transaction will compromise its ability to sustain its dominant position in the African seed business, limit its research and development capabilities, a development that will hinder growth.
In the year to March 31 2013, Seed Co's revenue totalled $110,6 million while after tax profit stood at $12,6 million.
- herald
Concern over Masvingo black market 
Kenya declares three days of mourning for Mugabe 
UK's Boris Johnson quits over Brexit stretegy 
SecZim licences VFEX 
Zimbabwe abandons debt relief initiative 
European Investment Bank warms up to Zimbabwe 
Young Investment Professional (YIP) Graduate Programme 2019 
Young Investment Professional (YIP) Graduate Programme 2019
Editor's Pick