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Zeder CEO: Pioneer deal means better value for shareholders

Oct 08 2019 21:13
Compiled by Carin Smith

While earnings and valuations at both Zeder and portfolio level are expected to be subdued during the next reporting period, CEO Norman Celliers has said he anticipates an "improved position to create value for shareholders" – particularly in light of the anticipated disposal of Pioneer Foods.

Zeder [JSE:ZED] has investments in broad agribusiness and related industries and historically focused on the food and beverage sectors.

Its 28.6% interest in Pioneer Foods remains its largest investment, representing 51.2% of its portfolio.

Celliers said the intended disposal of its interest in Pioneer Foods to PepsiCo was approved by an overwhelming 99.65% of voting Zeder shareholders.

Final implementation of the transaction remains subject to further terms and conditions.

Over R4bn to shareholders

The offer consists of a cash consideration of R110 per Pioneer Foods ordinary share. Zeder is expected to receive around R6.4bn, with net cash of around R4.82bn available after meeting certain obligations.

The group expects to distribute between R4.25bn and R4.75bn to shareholders and invest the remainder of the net proceeds into its existing portfolio or new opportunities.

The contemplated disposal had a positive impact on the share price of Pioneer Foods and, in turn, on Zeder's SOTP (sum-of-the-parts) value during the period under review, according to Celliers.

Zeder will, therefore, now proceed to vote in favour of this transaction at a general meeting of Pioneer Foods shareholders in October 2019.

Tough trading conditions

However, Celliers said on Tuesday, notwithstanding seasonal variances, Zeder's portfolio continued to trade under extremely difficult conditions during the interim period until the end of August 2019.

During the interim period, there was an 11% increase in its SOTP per share to R6.25, as at August 31, 2019.

The SOTP value per share is calculated using the quoted market prices for all JSE-listed investments, and internal valuations for unlisted investments. At the close of business on Monday, 30 September 2019, Zeder's SOTP value per share was R6.22.

Zeder's recurring headline earnings per share decreased by 63% to 3.6 cents due to prevailing challenging macro conditions, it said in a statement.

Outlook

Regarding Zeder’s investment in Zaad, as a strategic holding company that invests and operates in the specialised agri-inputs industry with a focus on emerging markets, Zeder has committed an additional R300m investment in the company to enable two transactions.

Zaad acquired all the remaining shares in Farm-Ag and concluded transaction agreements to acquire a 40% stake in the EAS group of companies in Kenya, with an option to acquire an additional stake in the future.

Celliers said the negative macro conditions are likely to remain unchanged in the short to medium term, but will likely improve over the longer term.

As a result, earnings and valuations at both a Zeder and portfolio level are expected to be subdued during the next reporting period, in his view.

"Notwithstanding these challenges, and particularly in light of the anticipated Pioneer Foods disposal, Zeder should be in an improved position to create value for its shareholders through this cycle," he said.

In line with its policy, Zeder will declare a final dividend at year end.

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