Libstar Holdings Limited (JSE:LBR) News - Disposal Of A 70% Interest In Libstar’s Household And Personal Care Business

Libstar Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 2014/032444/06)
(JSE share code: LBR)
(ISIN: ZAE000250239)
(“Libstar” or the “Group”)

DISPOSAL OF A 70% INTEREST IN LIBSTAR’S HOUSEHOLD AND PERSONAL CARE
BUSINESS COMPRISING THE CONTACTIM AND CHET CHEMICALS DIVISIONS

1. INTRODUCTION

   Shareholders are advised that Libstar has received an offer from PAPE Fund Managers
   Proprietary Limited (acting on behalf of PAPE Fund 3 General Partner Proprietary Limited
   in its capacity as General Partner of both PAPE Fund 3 ZAR Partnership and PAPE Fund
   3 USD Partnership) (“PAPE”) and Kanaka Chemicals Proprietary Limited (“Kanaka”) (“the
   Purchasers”) to acquire a 70% equity interest in the household and personal care
   businesses of Libstar comprising the Contactim and Chet Chemicals divisions (“the HPC
   businesses”) for a total purchase consideration of R174.6 million (“the Transaction”).

   A put and call option, exercisable by Libstar and the Purchasers, respectively, between 31
   December 2023 and 30 June 2024, will be entered into in relation to Libstar’s remaining
   30% interest in the HPC businesses (the “Option”). The price at which the Option may be
   exercised is based on the same valuation that was used to calculate the purchase
   consideration for the initial 70% equity interest to be acquired by the Purchasers, less a
   discount of 20%, being an amount of R42.72m. The total purchase consideration
   (including the price payable in terms of the Option) is therefore R217.32 million.

   The Transaction envisages a new company ("Newco”) being established to acquire the
   entirety of the HPC businesses as going concerns from Libstar.

2. OVERVIEW OF THE PURCHASERS

   PAPE Fund Managers
   PAPE is a boutique private equity fund manager with a 13-year track record across multiple
   fund mandates investing in sub-Saharan Africa, namely:

   •   Evolution One Fund, the first cleantech fund on the continent, capitalised at USD94m,
       and which had predominately international investors such as the IFC, European
       Investment Bank, African Development Bank and other international DFIs.
   •   PAPE Fund 1 and 2, capitalised collectively at R500 million.
   •   PAPE Fund 3, which had total capital commitments of R1.03bn as at final close on 29
       January 2020 and is a 100% black-owned, Level 1 BEE entity with investors namely:
       PIC, Eskom Pension and Provident Fund, SASME Fund, FMO, 27four Investment
       Managers, Alexander Forbes Investments, Transport Sector Retirement Fund, Impala
       Workers Provident Fund and the Rosebank Wealth Group.

   Kanaka Chemicals

   The directors of Kanaka are Kuben and Shireen Naidoo. Prior to joining Kanaka, Shireen
   was a partner at KPMG in South Africa, where she led the Climate Change and
   Sustainability Services team for 21 years. Prior to KPMG, Shireen was the Health, Safety
   and Environmental Manager for an international chemical company for 10 years.


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  Shireen’s aim is to integrate climate change and sustainability into Kanaka’s business and
  drive environmental and social impact in a way that makes good business sense. Kuben
  is the Director of Cdet Chemicals Proprietary Limited, an associate company of Kanaka.
  Kuben has worked in the international chemical industry for almost 20 years. Post the
  corporate world, Kuben established his own chemical business, and supplied products to
  the food and beverage industries such as for SAB and ABI. Kuben then ventured into the
  retail sector by manufacturing detergent products such as dishwashing liquids, all-purpose
  cleaners, window cleaners, tile cleaners, and bleach disinfectants.

3. RATIONALE FOR THE TRANSACTION

  Libstar is a producer and distributor of quality products and brands for the Consumer
  Packaged Goods Industry in South Africa and internationally. Its extensive product
  portfolio consists of more than 9 000 products and features many well-loved household
  staples. Over 90% of group revenue is generated from food, which includes dairy and
  value-added meat products, fresh produce, convenience food, groceries, baking and
  baking aids, snacks and confectionery.

  The Transaction serves to amplify Libstar’s strategic intent to focus and grow its existing
  food categories whilst transitioning its non-food division to a sustainable, transformed
  standalone business in partnership with the Purchasers.

4. PURCHASE CONSIDERATION

  Newco intends to fund a portion of the purchase consideration by raising new bank debt
  of indicatively R50 million. The purchase consideration payable by the Purchasers for
  70% of the equity in Newco will be R124.6 million. Libstar will therefore receive the
  proceeds of the Purchaser’s equity investment into Newco together with the full proceeds
  of the third party debt raised, which amounts to R174.6 million.

  As indicated in paragraph 1 above, the price at which the Option may be exercised is
  R42.72 million.

5. CONDITIONS PRECEDENT TO THE TRANSACTION

  Implementation of the Transaction is subject to the fulfilment or waiver, as the case may
  be, by no later than 30 June 2022 (or such later date as the parties may agree), of such
  conditions precedent as are usual for a transaction of this nature.

6. FINANCIAL EFFECTS OF THE TRANSACTION

  The value of the net assets being disposed of is R312 million and the loss before taxation
  attributable to those net assets is R64 million.

  The information set out in this paragraph has been extracted from the unaudited financial
  information of Libstar for the financial year ended 31 December 2021, prepared in terms
  of IFRS.

7. EFFECTIVE DATE

  The effective date of the Transaction will be the 10th business day after the date of
  fulfilment or waiver, as the case may be, of the conditions precedent.
                                                                                        
8. JSE CATEGORISATION

   Based on the collective consideration payable in respect of the Transaction and the
   Option, the Transaction is categorised as a Category 2 transaction in terms of the Listings
   Requirements of the JSE Limited.


Johannesburg
21 February 2022


Sponsor
The Standard Bank of South Africa Limited


Legal Advisor
Cliffe Dekker Hofmeyr Incorporated




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Date: 21-02-2022 09:00:00
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