Agriterra Ld Regulatory News (AGTA)

Agriterra Ltd / Ticker: AGTA / Index: AIM / Sector: Agriculture

5 October 2016

Agriterra Ltd ('Agriterra' or the 'Company')

MBO of Sierra Leone Cocoa Assets

Agriterra announces that it has completed the sale of its Sierra Leone cocoa assets in a management buy-out transaction (the "MBO") for a cash consideration of US$750,000 (the "Consideration").

Under the terms of the MBO, the Company has disposed of its interests in Baranca Tide Limited and West Africa Cocoa Services Limited (the intermediate holdings companies which hold the assets comprising the Company's cocoa business in Sierra Leone, the "Target Companies") with immediate effect; payment of the Consideration will be deferred for a period of 65 business days from completion of the MBO; in the event that the Consideration is not paid on the due date, the ownership of the Target Companies will immediately revert to the Company. The Target Companies have been sold in excess of their collective current book value of approximately US$460,000.

As shareholders will be aware, the Company has successfully established the necessary infrastructure from which a large scale commercial cocoa plantation and trading business can be developed in Sierra Leone. The next stage in the development of these assets requires significant capital investment. Given the impact of Ebola on the West African region as a whole and the lack of investment appetite from traditional finance sources, the board have formed the view at this time, after due investigations and careful consideration, that the Company is unlikely to be able to raise the finance to continue with the development of the cocoa plantation in the foreseeable future. In this context, the board therefore believe that it is in the best interests of the Company to complete the MBO to bolster the Company's cash reserves and to enable the MBO team to access other finance sources, such as dedicated development and sustainability funds.

The MBO is deemed to be a related party transaction pursuant to AIM Rule 13, as the owner of the vehicle through which the MBO is being effected is Adrian Simpson, a director of the Company's Sierra Leonean subsidiaries, which are indirectly the subject of the MBO. The directors of the Company, having consulted with Cantor Fitzgerald Europe, its nominated adviser, consider that the terms of the MBO are fair and reasonable in so far as its shareholders are concerned. 

The sale of these assets pursuant to the MBO is part of the Company's ongoing rationalisation programme. The proceeds of the sale of these assets will be applied towards the Company's general working capital requirements.

Andrew Groves, CEO of Agriterra commented "We are proud of the progress which we have made in Sierra Leone since 2011 in our efforts to establish an independent commercial-scale cocoa plantation and trading business. We are particularly proud to have been one of the only foreign companies to have retained a presence in the country through the Ebola crisis and to have contributed to the relief efforts through logistical support. As we now step away from this venture we are leaving a fantastic foundation from which Adrian and his team can look to expand operations and raise finance through avenues which were not available to Agriterra. Separately, the reduced ongoing cash outlay from cocoa operations will enable us to focus on core activities, whilst at the same time we retain our prospective palm oil assets in Sierra Leone."

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