DRC – Feronia Inc. an agribusiness company operating in the Democratic Republic of the Congo (DRC), has entered into a definitive purchase agreement with Straight KKM 2 Limited (KKM) to sell its equity interests in its operating subsidiary, Plantations et Huileries du Congo (PHC).
PHC is Feronia’s palm oil business which it acquired from Unilever in 2009. It produces crude palm oil (CPO) and palm kernel oil (PKO).
KKM is an entity incorporated in Mauritius primarily owned by a number of funds for which Kuramo Africa Opportunity Offshore Fund II GP Ltd. acts as general partner and Kuramo Capital Management, LLC acts as fund manager.
Under the terms of the agreement, KKM a long-term shareholder in Feronia will inject at least US$10m of new capital into PHC’s operations in exchange for its increased equity stake.
In addition, the Development Finance Institution (DFI) group of investors i.e. CDC, FMO, BIO and DEG will remain as lenders to PHC.
KKM will also assume the indebtedness and obligations owing to the Company’s senior lenders and 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.
In a press-release Feronia has revealed that KKM has signed a term sheet setting out the terms of a proposed restricting of PHC’s senior debt and bridging loans made by KKM and CDC to Feronia.
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 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.
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.”
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.
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