Zambeef Prod. Regulatory News (ZAM)

4 February 2013

Zambeef Products plc

("Zambeef" or the "Group")

Strategic Partnership

Transaction overview

Zambeef (AIM: ZAM), the fully integrated agri-business with operations in Zambia, Nigeria and Ghana, announces that it has entered into a share sale agreement and a shareholders' agreement (together, the "Agreements") with Rainbow Chicken Limited ("Rainbow"), South Africa's pre-eminent processor and marketer of chicken, for the sale of 49 per cent. of Zambeef's shareholding in its wholly owned subsidiary Zam Chick Limited ("Zam Chick" or the "Company") to Rainbow for a total cash consideration of US$14.25m (the "Consideration") (the "Transaction"). For more information on Rainbow please see the notes section.

Zam Chick currently manages and operates the Group's chicken broiler business, including the broiler houses, chicken abattoir and processing plant. The board of directors of Zambeef (the "Board") intends to leverage Rainbow's track record of technical expertise in the chicken broiler business to grow this area of the Group's operations, with a key focus on the processing of value added and processed chicken products, where Rainbow has demonstrated significant capabilities in the South African market.

The Board envisages that, following completion of the Transaction ("Completion"), each of Zambeef and Rainbow will assume principal responsibility for the following areas of the Company's operations:

·; Rainbow will provide:

o Technical specifications and standard operating procedures for broiler farms and processing facilities;

o Product specifications;

o Feed formulation for broiler chickens;

o Design and specification of facilities;

o Veterinary and disease control management; and

o Generating and maintaining quick service restaurant relationships.

·; Zambeef will be responsible for:

o Facilitating product sales through its existing retail outlets and targeting new customers;

o Legal matters and managing the impact of any changes to Zambian legislation impacting on the Company's operations; and

o Human resources, accounting and administration support.

The Group will apply the Consideration to meeting its general working capital requirements and reducing the need for third party facilities to finance and grow its operations.

Completion is subject to certain conditions precedent, to be satisfied within 90 business days following signing of the Agreements (the "Conditions Precedent"), including:

·; The approval of the Competition and Consumer Protection Commission of Zambia for the Transaction;

·; Rainbow obtaining the necessary approvals from the South African Reserve Bank;

·; Written confirmation that the Purchaser is satisfied with the accounts of Zam Chick; and

·; The execution of relevant lease agreements between Zam Chick and Zambeef.

As at 30 September 2012 the assets of Zambeef's poultry division had a book value of ZMK14,310m (c.US$2.8m), representing approximately 0.9 per cent of the Group's gross assets. In the year ended 30 September 2012 the revenue attributable to the poultry division was ZMK106,108m (c.US$22.3m), accounting for 10.8 per cent. of Group turnover and gross profit was ZMK26,571m (c.US$5.6m), representing 7.9 per cent. of Group profits for the same period. Effective from 1 October 2012 Zambeef transferred its poultry assets into one of its existing but inactive wholly owned subsidiary companies. The name of the subsidiary company to whom the poultry assets were transferred was changed to Zam Chick Limited on 16 October 2012.

Following Completion, Zam Chick will apply to change its accounting reference dates to 30 June.

The Share Sale Agreement

The key terms included in the share sale agreement are summarised below:

·; Zambeef is to transfer 49 per cent. of Zam Chick's issued share capital to Rainbow by the first day of the month following satisfaction of the final Condition Precedent (the "Effective Date");

·; The Consideration is to be paid in cash on or about the Effective Date;

·; The Conditions Precedent are required to be satisfied within the 90 business days following the signing of the Agreements; and

·; Zambeef has given certain warranties to Rainbow relating to the general status of the Company's assets and contracts, and has given certain undertakings to procure that the Company will obtain the necessary authorisations, licences and permits to carry out its business, and that the Company will be compliant with certain Zambian legislation.

The Shareholders' Agreement

The key terms included in the Shareholders' Agreement are summarised below:

·; The Company will, in the first instance, only issue new shares in the capital of the Company on a pre-emptive basis;

·; Zambeef and Rainbow shall each nominate up to two directors of the Company;

·; Both Zambeef and Rainbow agree to facilitate the business of the Company and for this purpose have agreed certain non-compete clauses;

·; Certain key decisions are reserved for consideration and approval by the shareholders of the Company, and require approval by shareholders holding 75% of the voting rights in the Company;

·; There are forced sale provisions in event of material breaches of the shareholders agreement, change of control of shareholders and in events of insolvency and criminal offences;

·; In the event of a change of the ultimate control of Rainbow, Zambeef has the option to buy, and Rainbow shall be obliged to sell, Rainbow's shares in Zam Chick at the then prevailing market value (the "Zam Chick Market Value", being the greater of: (a) 49 per cent of the Company's EBITDA, multiplied by 7.5; or (b) the Consideration;

·; After a period of two years from the Effective Date or earlier in event of a material breach of the shareholder agreement by Zambeef, Rainbow has the option to sell (and Zambeef shall be required to acquire) the whole of its shareholding in the Company at the Zam Chick Market Value, the consideration for such sale to be satisfied by Zambeef making a payment in cash or Zambeef making payment by the issue of ordinary shares in Zambeef to Rainbow at the prevailing market value, or a combination of cash and Zambeef shares.

Francis Grogan, Chief Executive Officer of Zambeef, commented:

"The Transaction provides Zambeef with an exciting opportunity to work with Rainbow to scale up the Group's poultry operations. Rainbow is one of South Africa's leading broiler producers and processors. They have an established track record and technical expertise in the chicken broiler business and Zambeef's board believes that Rainbow will add value to the Zambeef chicken operations, especially in the area of value added chicken products."

For further information, please contact:

Zambeef Products plc Tel: +260 211 369000

Francis Grogan, Chief Executive Officer

Yusuf Koya, Executive Director

Strand Hanson Limited Tel: +44 (0) 20 7409 3494

Angela Hallett

James Spinney

Panmure Gordon Tel: +44 (0) 20 7886 2500

Hannah Woodley

Callum Stewart

Buchanan

Mark Edwards Tel: +44 (0) 20 7466 5000

Sophie McNulty

Notes to Editors

Information on Zambeef

The Zambeef Group is one of the largest integrated agri-businesses in Zambia, involved in the primary production, processing, distribution and retailing of beef, chicken, pork, milk, eggs, dairy products, flour, bread, edible oils and stock feed, throughout Zambia and the surrounding region, as well as Nigeria and Ghana. The Group is also one of the largest cereal row cropping operations in Zambia, with approximately 8,350 hectares of irrigated and approximately 8,650 hectares of rain-fed, arable, developed land available for planting each year.

The Group has approximately 5,000 employees.

Further information can be found on www.zambeefplc.com

Information on Rainbow

Rainbow Chicken Limited is the pre-eminent processor and marketer of chicken in South Africa, producing 4 million birds per week. It is a fully integrated broiler producer that breeds and rears its own livestock, which it feeds from its own feed mills, processes, distributes and then markets as fresh, frozen, value-added and further-processed chicken.

In view of Rainbow's skills, experience and track record in adding significant value to the basic chicken product, Rainbow represents the ideal strategic partner for Zambeef as it seeks to move into the processing market. [The relationship is expected to create large opportunities outside of this initial transaction.]

Rainbow Chicken Limited, the holding company of the group, is incorporated in the Republic of South Africa and was listed on the JSE Limited in 1989. Rainbow Chicken Limited is the holding company of two principal operating subsidiaries, being RainbowFarms (Proprietary) Limited and Vector Logistics (Proprietary) Limited. These subsidiaries enable the group to operate as a vertically integrated chicken producer. Rainbow operates in the local retail, wholesale and foodservice channels with four brands - Rainbow, Farmer Brown, Rainbow Simply Chicken and Rainbow FoodSolutions. It also produces a variety of dealer-own brands for a number of retailers and wholesalers.

Rainbow is a 73.4 per cent. subsidiary of Remgro Limited.

Further information can be found on www.rainbowchickens.co.za 

Information on Remgro Limited

Remgro Limited is an investment holding company listed on the JSE Limited, with a market capitalisation of over ZAR 63 billion (c.US$7 billion). Originally incorporated as Rembrandt Group Limited, the company currently has an investment portfolio of more than 30 companies including FirstRand Bank, Unilever South Africa and Total South Africa.

Remgro Limited invests in businesses that can deliver superior earnings and dividend growth over the long term. This involves the acquisition of meaningful interests in companies in order to significantly influence these companies. The focus is primarily on the market in South Africa, but international opportunities are also considered, given the right circumstances.

Further information can be found on www.remgro.com