The agreement states that 10% is to be paid now with the other 90% to be paid by the completion date of 15 March 2020. The net sale proceeds will be used to pay down Zambeef’s debt to reduce gearing and interest costs. Net proceeds, after payment of various regulatory and other professional fees/cost, are expected to be around $9.25m.
Sinazongwe Farm is made up of three land parcels comprising a total land area of approximately 2,549.8 Ha. of which approximately 1,815 Ha is developed, arable land under irrigation. The main crops grown on the Farm are soya beans between November and March, and wheat from April to September. It was acquired by Zambeef in 2003 for approximately $2.3m.
There is a feedlot and abattoir on the land which will separately be sub-divided and remain in the name, title and ownership of Zambeef. Other key terms of the deal include Chenguang retaining and re-employing all local Zambian staff from the completion date, and for Chenguang to grant Zambeef free and unfettered use of up to 200,000 litres of water per day for use on the feedlot and abattoir.
In accounts filed, for the year ending September 2018, Sinazongwe Farm generated negative EBITDA of $0.3m; was valued at $10.3m, accounting for 4% of group net asset value; and accounted for 1.7% of group revenues.
Dr. Jacob Mwanza, chairman of Zambeef, said: "This Transaction is in line with and a continuation of the Group's strategic vision, which will allow Zambeef to focus on growing its core business, which is the production and retailing of cold chain meat and dairy products and stockfeed, delivered through the Group's extensive processing, distribution and retail network. Furthermore, the Transaction will allow Zambeef to continue to reduce its overall gearing, and in so doing, reduce interest costs."