Investing in Zeder
Why do Zeder and its underlying agri investments make for an exciting investment opportunity?
We believe that there is a gap between the intrinsic value and current market price of agricultural companies, which will close in the long term.
Attractive investment vehicle
- An investment in Zeder gives investors in the agri industry a greater geographical spread in their investments and diversifies their underlying portfolio.
- Due to the diversified nature of Zeder's portfolio, an investment in Zeder should carry a lower investment risk than a direct investment in one specific agricultural company.
Eliminate the liquidity discount
- All of Zeder’s agri investments to date have been in unlisted companies with limited liquidity in the over-the-counter market or the trading rooms where they currently trade.
- Due to this illiquidity, shares in certain agri companies can be bought at attractive prices.
- The liquidity in the listed Zeder's shares will present current agri company investors with an alternative investment.
Shift towards returns for shareholders
- The agricultural environment has undergone major changes in the past 5 to 10 years with the conversion from co-operatives to public companies.
- The co-operatives’ objective was to deliver good service and products at the lowest possible price to its producers (mainly farmers who were members).
- Given the effects of globalisation and the fact that banks and/or financial institutions are the main providers of capital, the new agricultural companies' purpose has changed.
- Whilst they continue to provide good service and products, they have shifted their focus towards providing positive returns to their shareholders.
- Shareholding was initially limited to the producers in the co-operatives, but has recently become more diversified.
Agri companies hold significant stakes in other major companies
- As a result of the historical and natural development of the agricultural sector, some agricultural companies hold significant stakes in highly successful businesses that process primary agricultural products.
- Key examples include: Kaap Agri’s significant interest in the Pioneer Food Group and KWV’s shareholding in Distell.
Agri sector as a whole remains untapped
- Zeder believes that the shares of agri companies, and other companies that form part of the agricultural chain, have been bought, and can still be bought, at attractive prices – as potential agri investments have historically failed to deliver returns in line with their significant asset bases.
- Such underachievement is largely attributable to changes in the agricultural environment over the past few years – including significant macro economic and legislative adjustments.
- Companies in Zeder’s portfolio have promising asset values (including well-established brands), have recently been experiencing positive dividend streams and have good management in place.
How is Zeder uniquely placed to make successful investment in the agricultural sector?
Benefit from the knowledge and insight gained by PSG
- PSG has gained invaluable knowledge and insights into investing in the agri sector.
- This knowledge will be at the disposal of Zeder, and PSG has been appointed as Zeder's managers.
- PSG will be responsible for the management of the company and will be entitled to an annual management fee and performance fee.
- The annual management fee will be 2% of the net asset value of the company excluding cash.
- All costs associated with Zeder, including all salaries and administrative expenses, will be borne by PSG.
- The performance fee shall be based on a measure of Zeder’s total returns in relation to the benchmarked return (a 10% share of the return above the benchmark return).
- The benchmark index is an index calculated by equally weighting the FTSE-JSE Beverages Total Return Index (TRI041) and the FTSE-JSE Food Producers Total Return Index (TRI043), or their successors in title.
- Such fee structure is in line with industry norms and market trends.
- PSG will ensure that the investment mandate granted to it by Zeder is strictly adhered to via various reportbacks, and checks and balances mechanisms. Such mandate is wide enough to allow the management company to seek out investments in unlisted companies that are generally within the agri sector, but without limiting the management company’s discretion in its investment choices.
Rationale for listing Zeder
Unique investment opportunity
- As a listed company, Zeder will provide the public with the opportunity to indirectly acquire a diversified interest in agri companies.
- A listed company will be better placed to achieve the necessary critical mass necessary to take advantage of opportunities in the agri environment.
- Once listed, Zeder’s shares will be freely tradable on the JSE.
- Listing Zeder will create an opportunity for current agri shareholders to swap their unlisted agri shares for listed shares in Zeder.
- An independent listed entity with its own board of directors is less likely to be regarded as an outsider with a hostile acquisitive agenda. PSG is mindful of making a clear distinction between its agri investment activities, through Zeder, and its other investment initiatives.
- By listing, PSG wishes to emphasise Zeder’s role as an independent investing entity — this is also evident from its investment strategy of holding only approximately 20% in any given agri investment.
Future capital raisings
- Listing will facilitate future capital raisings.