Cargill to acquire Clark Cotton from AFGRI

10 Apr '06

3 min read

Agricultural services and products offering company AFGRI Limited has announced the sale of its cotton ginning interests to Cargill under which Cargill will acquire, subject to certain conditions, the cotton ginning interests of Clark Cotton, comprising three gins in Zambia, three in South Africa and a majority interest in a company owning two gins in Malawi.

Under the agreement, Cargill will acquire the fixed and intangible assets of Clark Cotton and, at book value, the inventory and debtors of Clark Cotton in Zambia and South Africa, as well as working capital loans to Clark Cotton Malawi.

In Malawi, Cargill will partner with Admarc, the government's agricultural and marketing corporation, which owns the minority interest in Clark Cotton Malawi.

Afgri Products CEO Louis Wolthers says the total value of the transaction is approximately R260 million, which includes the fixed and intangible assets of Clark Cotton, as well as inventory, debtors and working capital loans.

The pro forma financial effects of the transaction on Afgri's results will be to reduce basic earnings per share by 2,1% to 17,7 cents. Headline earnings per share will increase 10% to 16,7 cents, and net tangible asset value will be boosted by 1.9% to 307,7 cents.

The effective date of the transaction is expected to be 1 May 2006. Explaining the rationale for the sale, Wolthers says, “Clark Cotton was not part ofour core business and the decision to sell is consistent with our philosophy of exiting businesses that fail to meet our required rate of investment return,” he says.

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