Feronia Inc. enters into restructuring purchase agreement
Feronia Inc. (“Feronia” or the “Company”) today announces that, further to its announcement on May 22, 2020 and the subsequent third party sale process announced on June 2, 2020, it has today entered into a definitive purchase agreement (the “Purchase Agreement”) with Straight KKM 2 Ltd. (“KKM” or the “Purchaser”) that provides for the acquisition by KKM of the Company’s direct and indirect equity interests in its operating subsidiary, Plantations et Huileries du Congo (“PHC”).
As announced on June 2, 2020, the Company appointed Ernst & Young Inc. and Ernst & Young Orenda Corporate Finance Inc. (collectively “E&Y”) as independent financial advisor to conduct the Company’s proposed third party sales process and potential restructuring announced on May 22, 2020. As a result of the process, KKM provided the best and sole offer to the Company.
Under the terms of the Agreement, the purchase price for the Purchased Assets shall consist of (i) a cash payment of US$500,000 to be held and utilized by E&Y for the payment of costs relating to the transactions contemplated by the Purchase Agreement and the BIA Proceedings (as defined below); (ii) the assumption of the indebtedness and obligations owing to the Company’s senior lenders; and (iii) the assumption of the indebtedness and obligations of the Company’s subsidiary Feronia Maia Srl owing to CDC Group Plc and KN Agri LLC, an affiliate of KKM. As part of the purchase price, KKM and its consortium of investors have also provided an undertaking to invest a further US$10 million to fund the operations of PHC. A key condition of entering into the Purchase Agreement was the satisfaction by the Company, CDC Group plc and the Company’s senior lenders with the Purchaser’s written action plan regarding ongoing Environmental, Social and Governance matters for the operations of PHC.
The Company has been provided with a copy of a non-binding term sheet between KKM, CDC and the Company’s senior lenders providing for a restructuring of their debt.
The Agreement is subject to the Company initiating a proceeding pursuant to Division I, Part III of the Bankruptcy and Insolvency Act (Canada) (the “BIA Proceedings”). The Company expects to file a Notice of Intention to Make a Proposal (“NOI”) pursuant to the Bankruptcy and Insolvency Act (Canada) to endorse the transactions contemplated by the Purchase Agreement on or about July 22, 2020 and has named Ernst & Young Inc. to act as proposal trustee.
Commenting on the Purchase Agreement, Mr. Walé F. Adeosun, Founder and Chief Investment Officer of Kuramo Capital Management, a principal investor in KKM, said: “KKM brings together a group of African investment professionals with deep roots in their communities in Africa. We were born and raised in Africa and many of us still live in Africa. As such, ensuring that all our investments achieve success in a responsible manner is very important to us; PHC is no exception.”
Kalaa Mpinga, Founder and Chief Executive Officer of Mafuta Investment Holding and the local investor in KKM commented: “Having initially invested in Feronia in late 2017, we know the issues PHC faces, including those being looked at under the DFI Lenders’ Independent Complaints Mechanism; a process we fully support. Through this transaction we are demonstrating our commitment to PHC and the communities associated with its plantations in the Democratic Republic of the Congo. I hope this will encourage my fellow compatriots to also invest in the long neglected agricultural potential of the country.”
Larry Seruma, Executive Chairman of Feronia Inc. said: "KKM and its shareholders’ objective has always been to turn PHC into a truly sustainable business, and we look forward to continuing working with CDC, our DFI partners and the DFI’s Independent Complaints Mechanism, as we strive to complete this journey.
"Through this transaction, PHC will become part of a nimbler and more efficient company and the reduction in administrative and corporate costs will allow more money to be invested on PHC’s operations in the Democratic Republic of the Congo."
The independent directors of the Company unanimously approved the execution of the Purchase Agreement and the filing of the NOI. Completion of the transactions is subject to a number of conditions, including court approval of the BIA Proceedings. The transaction is expected to close on or before September 7, 2020.