Tarlton Beetroot Business Plan — Company, Structure and Stage of Development

Legal structure, ownership and the honest current stage: a first-time grower without a production record.

Section 4 of 37

Company, Structure and Stage of Development

Jump to section

A pre-revenue special purpose vehicle with a leased site, a founder team of two and no contracted offtake — described as it is rather than as it will be.

Table 3 Company particulars

Item

Particulars

Legal form

Private company incorporated under the Companies Act 71 of 2008

Proposed name

Tarlton Beetroot Farming Company (Pty) Ltd

Tax status

Resident company; farming operations taxed under the First Schedule to the Income Tax Act 58 of 1962. Corporate rate 27 per cent.

VAT status

Registered vendor. Fresh vegetable sales are zero-rated under Part B of Schedule 2 to the VAT Act; the Company is in a permanent input-tax refund position.

Phase 1 site

Approximately 1 hectare of irrigable land with shed and ablutions, leased at Tarlton, Gauteng West

Phase 2 site

To be acquired: 85 hectares, of which 62 hectares arable and not less than 32 hectares under a validated water use entitlement

B-BBEE

Targeted Level 4 at Phase 1 through the ownership and enterprise development elements, improving to Level 2 by Year 4 through the skills development and socio-economic development elements

Governance

Board of four from financial close of Tranche B: two founders, one Series A nominee, one independent non-executive with agricultural operating experience

Ownership before and after each tranche

Table 4 Indicative capitalisation table, base case, per cent of ordinary shares

Shareholder

At incorporation

After Tranche A

After Tranche B

At exit

Founders

100.0%

53.7%

14.4%

14.4%

Seed investors

—

46.3%

12.4%

12.4%

Series A investors

—

—

73.2%

73.2%

Total

100.0%

100.0%

100.0%

100.0%

Founders are credited with R2.20m of pre-money value for site identification, agronomic trial work and channel development, in addition to R1.10m of subscribed cash. Series A pre-money of R7.50m is the plan assumption; Section 29 tests the consequences of moving it.

The dilution is severe and should be understood plainly. Founders move from full ownership to 14.4 per cent because the venture is capital-hungry relative to the value created before the Series A. This has a governance consequence: after Tranche B the Series A investor controls the company outright, and the founders’ economic incentive rests almost entirely on the 5.73 times return their retained stake produces on the base case. Any management incentive scheme should be sized with that in mind.

Mission, objectives and current stage

The Company’s objective is to become a credentialed, year-round supplier of washed and pre-packed beetroot and rotation vegetables to Gauteng formal retail and wholesale channels, operating from freehold land with secure water. It is not to be the largest beetroot grower in South Africa, which would be neither achievable nor desirable given the size of the national crop.

Table 5 Stage of development at the date of this document

Element

Status

Comment

Incorporation

Not yet effected

To be completed at financial close of Tranche A

Phase 1 lease

Heads of terms identified

Not signed; no deposit paid

Water source, Phase 1

Existing borehole on leased property

Yield test required as a condition precedent

Agronomic trial data

None

The Phase 1 block is itself the trial

Customer contracts

None

No market agent mandate, retail listing or offtake in place

Certification

None

LocalG.A.P. targeted in Year 1, GLOBALG.A.P. in Year 3

Management team

Two founders identified

Neither has run a commercial vegetable operation at Phase 2 scale

Series A land

Not identified

Search commences month 16; a specific property is not assumed

04