Farmmi has signed an acquisition framework agreement with the shareholders of FOUR SEASONS HOLDING GROUP BRAZIL LTDA covering 100% of the target's equity, the Nasdaq-listed agricultural products supplier said on August 4. No purchase price was disclosed.
Under the terms described in the release, the final price is to be set on the basis of a fair valuation carried out by a qualified independent valuation firm. Payment is expected to be made through the issuance of Farmmi Class A ordinary shares, with the number of shares and other terms left to definitive transaction documents that have not yet been signed.
That structure is the most consequential open item for existing holders. Farmmi reported 41,434,077 Class A ordinary shares and 3,873 Class B shares outstanding. Because the consideration is to be paid in stock at a price nobody has determined, the dilution attached to the deal cannot be calculated from what has been published.
The target is a Brazilian limited liability company registered in Chapecó, in the state of Santa Catarina. According to Farmmi, it operates in global agricultural supply chain and trading activities spanning soybeans, sugar, chicken, beef and other agricultural products. The release gives no revenue, profit, asset or headcount figures for the business, and no indication of its size relative to Farmmi.
A framework agreement is a preliminary document setting out the intended shape of a transaction. It is not a completed purchase. Farmmi says due diligence, the independent valuation and the drafting of definitive agreements are still ahead, and it did not give a timetable for any of those steps or for closing.
The company frames the transaction as a way to link South American supply with international buyers and to widen the product range and geographic reach of its supply chain business. Those are the company's own expectations, stated conditionally in the release, rather than described outcomes.
Chief executive Yefang Zhang said the agreement is "an important step for the Company in expanding its international agricultural product supply chain network," adding that Farmmi intends to assess synergies in products, channels and markets through due diligence and valuation work.
Farmmi was established in 1998 and sells edible mushrooms including shiitake and mu er, along with other agricultural products, and provides logistics and supply chain services in the United States. It is based in Lishui, China.
What the announcement does not contain: a price, a share count for the consideration, target financials or a closing date. Until definitive documents are filed, the economics of the proposed acquisition remain undefined.
Source: PR Newswire
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