The information communicated within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

10 March 2025

Agriterra Limited

('Agriterra' or the 'Company')

Agriterra Limited / Ticker: AGTA / Index: AIM / Sector: Agriculture

Mozambique Business Divestment and Notice of GM

Agriterra Limited, the AIM-quoted African agricultural company, advises that it will today be posting to Shareholders a circular, together with a Notice of General Meeting and Form of Proxy, to convene a General Meeting for 31 March 2025 to vote on the proposed disposal of the Company's Mozambique Agricultural Business, and accordingly, upon completion, the designation of the Company as an AIM Rule 15 cash shell.

Extracts from the circular are copied out below, including the expected timetable of principal events and definitions. Shareholders are strongly encouraged to read the circular in full, which will be available on the Company's website shortly.

Extracts commence below

Letter from Chair

1.         Introduction

The Company has today announced that it has entered into a conditional agreement to dispose of its Mozambique agricultural business to its majority shareholder, Chepstow Investments Limited.

The Disposal will be achieved by the sale by the Company of its:

·           100% interest in the issued share capital of AML; 

·           1% direct interest in the share capital of each of DECA, Compagri, Mozbife and CDL; and

·           the benefit of the AGTA-Moz Debts (together, the "Sale Assets").

If approved by shareholders, the consideration for the Disposal will be satisfied by Chepstow:

·           irrevocably releasing the Company from its obligations in relation to the CIL-AGTA Debt;

·           paying the costs associated with the Disposal, estimated to be approximately £80,000;

·           settle the Company's outstanding trade creditors, estimated to be approximately £170,000; and

·           providing the Company with the Working Capital Facility (together, the "Consideration"). 

In view of the size and the fundamental nature of the Sale Assets (representing the entirety of the trading operations of the Company), it is a requirement of the AIM Rules that the Disposal be approved by Shareholders at a general meeting of the Company; subject to approval being given to the Disposal, the Directors are also proposing to change the name of the Company.

The purpose of this document is to provide Shareholders with further details about the Disposal and the proposed change of name of the Company. The document also sets out the Directors' reasons for considering that the proposals are in the best interests of Shareholders as a whole and a recommendation that you vote in favour of the Resolutions, which are required to be passed in order for them to be implemented.

The notice of the General Meeting is set out at the end of this document.

2.         Information on the Mozambique Agricultural Business

The Mozambique Agricultural Business is focused on agricultural investment and sustainable development in Southern Africa, providing high quality food produce for local markets whilst simultaneously improving the livelihoods of over 250,000 smallholder farmers by improving their access to markets. Operating in Mozambique, Agriterra's longer term strategy is to become one of the largest agri-operators and leading food providers in Southern Africa.

The Company currently has three operating agricultural divisions:

·  Grain, which operates maize purchasing and processing businesses through DECA and Compagri

· Beef, which sources cattle from local farmers and then processes them in its own feedlot and abattoir through Mozbife

· Snax, which transforms maize by-products into a different flavoured fried and baked snacks through Deca Snax Limitada (a 50% subsidiary of DECA, "Snax")

The Company has built strong brands in Mozambique through the MozSubs and established distribution networks that allow both wholesalers and retailers direct access to its products.

The Company has attempted to use these foundations to grow and diversify its product range in order to gain further market share of the agricultural sector in Mozambique and explore export and investment opportunities in surrounding countries.

3.         Recent Results and Current Trading

As announced by the Company on 1 October 2024, for the year ended 31 March 2024, the Group made an operating loss of US$1.85m, and a net loss after tax of US$3.21m.

For the half-year ended 30 September 2024, as announced by the Company on 9 December 2024:

·         the Group's revenue increased by 5% to US$4.8m for the period due to a US$0.8m increase in the revenue of the Grain division (as a result of high selling prices even though volume remained constant) and a decline of US$0.5m in the revenue of the Snax division; 

·       in the period, gross profit remained constant at US$0.7m for the period, achieving a gross margin of 14% across the Group, which was a decrease in gross margin when compared to the previous period, as a result of the high cost of purchasing maize, which reduced margins in the Grain division to 9%;

·         the Group's operating loss for the half-year period was US$0.62m and net loss after tax of US$1,48m; 

·         the Group's operating expenses decreased from US$1.89m to US$1.47m; and

·         finance costs (at SOFR+6%) increased by 55% to US$0.85m as a result of:

Ø  additional shareholder loans received in the prior year (used for maize purchases) which were not repaid; and

Ø  an additional shareholder loan for the procurement/commissioning of a biscuit factory.

Since this announcement, trading conditions have remained challenging.

4.         Background and reasons for recommending the Disposal

As set out in paragraph 3 above, the Group faces ongoing financial challenges despite the best efforts of the Board to improve the situation by taking actions including (without limitation):

·           by implementing a retrenchment programme in the year ended 31 March 2023; and

·         undertaking a strategic review which led to the formulation of a 5-year plan to improve and expand the operational performance across all divisions to achieve profitability.

Despite these efforts, the Board expects that the Company will report a further loss for the year ended 31 March 2025.

While considerable efforts have been made to stabilize and grow the Mozambique Agricultural Business there have been consistent and significant internal and external challenges in the political and economic environment, notably:

·      in 2016 a US$2 billion "black hole" was discovered in Mozambique's finances; this had immediate (IMF suspended its investment programme and other international lenders and donors ceased working in Mozambique) and longer-term impacts on the country's economy, contributing to more challenging trading conditions; 

·        in 2018 there was a significant outbreak of foot and mouth disease in Mozambique which had a severely negative impact on Mozbife's ability to operate and trade as planned; 

·     during 2019, cyclones Idai and Kenneth resulted in significant damage and flooding to large areas of Mozambique, further impacting the already weakened economy; 

·         in 2020 the COVID pandemic severely impacted the operating environment in Mozambique;

·         ongoing security issues:

Ø  in the north of Mozambique, which have stalled the anticipated development of significant gas projects; and

Ø  since the recent presidential election which have had a detrimental effect on businesses operating in Mozambique;

·      the high cost of obtaining financing from banks to fund trading operations (which, in turn, led to the Company obtaining working capital from Chepstow);

·         the inability for the Mozambique Agricultural Business to generate sufficient revenues in order to enable the Company to provide for debt repayments to Chepstow or to invest into growing its operations;

·           the lack of interest in the sale of the Mozambique Agricultural Business' farms at Nyazonia, Dombe and/or Mavonde; and      

·        the costs of maintaining a public listing which are proving disproportionate to the underlying revenue generation of the Mozambique Agricultural Business.

It is noted that Chepstow, as the Company's principal source of financing, has, to date, extended maturity dates and provided further finance to the Company, as needed. That said, the Directors understand that this cannot be expected to continue indefinitely, and that action must therefore be taken to address the situation. However, the Directors do not believe there is a realistic prospect of securing debt finance on reasonable terms from an external lender to refinance the existing debt position with Chepstow.

Additionally, given the current depressed state of the equity markets, particularly for micro-cap companies, the Directors believe, having consulted with their advisers that securing the equity investment to refinance the existing debt and finance operational growth would be very difficult to achieve. In any event, the Directors believe that there is a high likelihood that any additional investment would only extend the status quo and would not be sufficient to enable the Mozambique Agricultural Business to achieve profitable growth or to become self-sustaining on a stand-alone basis.

The Directors believe that, given the financial position of the Company, the interests of the Mozambique Agricultural Business and its stakeholders will be best served outside the public arena and without the considerable cost, management time and the legal and regulatory burden associated with maintaining the Company's AIM quotation. Consequently, the Directors consider that the interests of Shareholders and other stakeholders will be best served by undertaking the Disposal.

Following completion of the Disposal, the Company will continue to be quoted on AIM as an AIM Rule 15 cash shell which the Directors hope will provide opportunities to create and deliver enhanced shareholder returns. Completion of the Disposal is expected to take place within two (2) months of the General Meeting. In this interim period pending completion of the Disposal, the Company will not be responsible for the funding or day-to-day management of the Mozambique Agricultural Business, nor be entitled to any cashflow derived from it.

Shareholders should note that if the Disposal is not approved at the General Meeting, the future of the Company in the medium to longer term as a going concern without an immediate injection of new equity or unsecured debt will need to be carefully considered by the Directors.

5.         Principal terms of and conditions of the Disposal Agreement and the Working Capital Facility

Disposal Agreement

Under the terms of the Disposal Agreement, the Company is proposing, subject to satisfaction of various conditions precedent (discussed below) to sell the Sale Assets to Chepstow for the Consideration.

The Disposal Agreement:

·           is subject to satisfaction or waiver (if applicable) of the following conditions precedent no later than the date falling 180 days after the date of the Disposal Agreement:

Ø  obtaining Shareholder approval (by way of passing Resolution 1 to be proposed at the General Meeting) of the Disposal as a "fundamental change of business" for the purposes of AIM Rule 15;

Ø  the passing at a general meeting of the MozSubs of resolution(s) approving the Transaction;

Ø  submission of the required form of notification to the Mozambican Competition Regulatory Authority ("Autoridade Reguladora da Concorrencia", "CRA") in relation to the change of control of the MozSubs (the "Competition Notification") and the CRA either providing a written notice of approval or not objecting in response to the Competition Notification within a period of 30 (thirty) days following submission;   

Ø  submission of the required form of exchange control approval application to the Bank of Mozambique ("Banco de Moçambique", "BoM") in relation to the ultimate change of control of the MozSubs and the transfer of the benefit of the AGTA-Moz Debts to Chepstow (the "Exchange Control Application") and approval(s) having been obtained from the BoM in relation to the Exchange Control Application;

Should Resolution 1 not be passed at the General Meeting or any of the other conditions cease to be capable of being satisfied, the Disposal Agreement will terminate.

·       contains limited "buyer protections", reflecting Chepstow's position, involvement with and knowledge of AGTA's business operations;

·        contains other customary and commercially negotiated terms agreed between the parties in relation to the Disposal; and

·         is governed by the laws of England and Wales, with the parties agreeing that any disputes will be referred to and resolved under LCIA Arbitration Rules.

Working Capital Facility

Under the terms of the SPA, the Working Capital Facility will be executed immediately following the passing of the Resolutions approving the Disposal, and under the terms of the Working Capital Facility Chepstow will provide the Company with access to an unsecured loan facility in the amount of up to £750,000 on and subject to the following material terms:

·         the purpose of the Working Capital Facility is to provide the Company with access to capital to ensure that the Company has sufficient working capital from the passing of the Resolutions until the date falling at least 18 (eighteen) months from completion of the Disposal (the "Deadline Date");

·     subject to the satisfaction of standard drawdown conditions including the passing of the Resolutions, Chepstow will advance funds to the Company under the Working Capital Facility, upon request; 

·       the maturity date of the Working Capital Facility (at which point the entire facility together with accrued interest will be repayable by the Company) will be the earlier of the Deadline Date  and the date on which the Borrower completes an acquisition that would qualify as a reverse takeover under AIM Rule 14 or becoming an investing company in accordance with AIM Rule 8 (including raising a minimum of £6 million and publishing an admission document, in either case a "Repayment Transaction"). However, in the event that a Repayment Transaction has not taken place before the Deadline Date, Chepstow will irrevocably release the Company from its repayment obligations under the Working Capital Facility.

·        interest shall be charged at the rate of 4.5% per annum (or part thereof, if applicable), on a daily basis on amounts drawn down under the Working Capital Facility;

·       the Working Capital Facility contains standard borrower covenants, representations and warranties and event of default provisions;

·         the Working Capital Facility is governed by the laws of England and Wales, with the parties agreeing that any disputes will be referred to and resolved under the rules of the Mauritius International Arbitration Centre, in Mauritius.

Schedule Four Disclosure

The Mozambique Agricultural Business is the Group's only activity and therefore the Group's financial results are an effective proxy for the financial results of the Mozambique Agricultural Business. As at 30 September 2024, the Group reported an unaudited total asset position of US$30.28 million and for the year ended 31 March 2024, the Group reported an audited operating loss before interest and tax of US$1.853 million. Following completion of the Disposal, and before costs are incurred in respect of pursuing the Company's future strategy, the Group expects to have a net asset position of roughly zero.

6.         Related Party Transaction

Entering into the Disposal Agreement and associated documents, including the Working Capital Facility, constitutes a related party transaction under Rule 13 of AIM Rules given that Chepstow is a substantial shareholder of the Company. In this context, Caroline Havers, Neil Clayton and Sergio Zandamela (being the Directors on the Board who are considered to be independent of Chepstow) consider, having consulted with the Company's nominated adviser, Strand Hanson Limited, that the terms of the Disposal Agreement and associated documents are fair and reasonable insofar as its Shareholders are concerned.

7.         Future strategy

If the Disposal is approved by Shareholders and completes in accordance with its terms, the Company will move forward as a cash shell in accordance with Rule 15 of the AIM Rules, supported by access to the Working Capital Facility.

The Directors intend to seek to acquire another company or business in exchange for the issue of Ordinary Shares in a single "reverse takeover" transaction (an "RTO"). Pursuant to Rule 14 of the AIM Rules, an RTO transaction would require the publication of an Admission Document in respect of the proposed enlarged entity and would be conditional upon the consent of Shareholders being given at a general meeting.

The Company will be required to make an acquisition, or acquisitions, which constitute an RTO under AIM Rule 14 on or before the date falling six (6) months from the completion of the Disposal or apply to be re-admitted to trading on AIM as an investing company under AIM Rule 8. Failing that, the Company's Ordinary Shares will be suspended from trading on AIM pursuant to AIM Rule 40. If the Company's shares remain suspended for six (6) months, admission of the Company's shares will be cancelled.

In considering the Company's future strategy, the Directors will seek to identify opportunities offering the potential to deliver value creation and returns to Shareholders over the medium to long-term in the form of capital and/or dividends.

Market conditions may have a negative impact on the Company's ability to make an acquisition or acquisitions, which would constitute an RTO under AIM Rule 14. There is no guarantee that the Company will be successful in meeting the AIM Rule 14 deadline as described above.

If no suitable acquisitions can be identified on a timely basis, the Directors will consider appointing a liquidator and entering a members' voluntary liquidation to return any remaining cash to Shareholders.

8.         Change of Name

To reflect the new direction of the Company, the Board is proposing to change the name of the Company.

Under section 25 of the Companies (Guernsey) Law, 2008 (as amended), a change of name requires the passing of a special resolution of Shareholders. Therefore, a special resolution will be put to the General Meeting to approve the Company's change of name to: "PACSCo Limited".

If Resolution 2 is approved, the change of name will become effective once the Guernsey Registrar of Companies issues a certificate of name change, which should complete within 14 (fourteen) days of the submission of the change of name application to the Guernsey Registry. The application for name change to the Guernsey Registry, if approved by special resolution, shall be made as soon as practicable following the General Meeting. The tradeable instrument display mnemonic ("TIDM") of the Company is expected to change to "PACS" around the same time as announcing that the name change has become effective.

9.         General Meeting

Set out at the end of this document is a notice convening a General Meeting of the Company to be held at 12.30 p.m. on 31 March 2025 at 26 Mount Row, London W1K 3SQ.

The Notice of General Meeting sets out the proposed Resolutions upon which Shareholders will be asked to vote to approve the Disposal Agreement and to the change of name of the Company.

To become effective the Resolutions require passing by a simple majority in the case of the Disposal Agreement, and a majority of not less than 75% in the case of the name change at a meeting of such Shareholders.  A resolution passed on a poll taken at a meeting is passed by a majority of not less than 75% if it is passed by members representing not less than 75% of the total voting rights of the members who, being entitled to do so, vote in person or by proxy on the resolution.

10.       Recommendation and Shareholder Support

The Directors unanimously recommend Shareholders to vote in favour of the Resolutions.

Chepstow, as a 50.58% shareholder of the Company, has confirmed its intention to vote in favour of the Resolutions. As such, it is highly likely that Resolution 1 will be passed, and likely that Resolution 2 will be passed. All Shareholders are encouraged to vote.

11.       Action to be taken

Shareholders will find on the Company's website a Form of Proxy for use in connection with the General Meeting. To be valid, the Form of Proxy should be completed and returned in accordance with the instructions thereon. Completion and return of the Form of Proxy will not prevent a Shareholder from attending and voting at the General Meeting should he/she/it so wish.

Expected Timetable of Principal Events

Announcement of the proposed Disposal                                            10 March 2025

Publication and posting of this document and Form of Proxy          10 March 2025

Latest time for receipt of Form of Proxy                                               12.30 p.m. on 26 March 2025

General Meeting                                                                                       31 March 2025

Expected completion of the Disposal                                                    within two (2) months of the General Meeting

Definitions

Extracts end

** ENDS **

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