| Mon 4 May 2009, 17:21 | | CSP - Chemical Specialities - Proposed disposal by ChemSpec of immovable |
|
CSP
CSP
CSP - Chemical Specialities - Proposed disposal by ChemSpec of immovable
property, new operating lease and withdrawal of cautionary
Chemical Specialities Limited
Incorporated in the Republic of
South Africa
Registration number: 2005/039947/06
Share code: CSP
ISIN code: ZAE000109427
("ChemSpec" or "the company")
Proposed disposal by ChemSpec of immovable property, new
operating lease and withdrawal of cautionary
1. Introduction
On 23 February 2009, ChemSpec entered into an agreement ("the Agreement")
with Zevoli 243 (Proprietary) Limited, Registration number 2009/000997/07
("the Purchaser") to dispose of the following immovable property:
- Erven 105, 106, 108, 109 and 205 Canelands Extension 6, KwaZulu Natal
and Portion 1973 and Portion 2271 and the Remainder of Portion 1999 of the
Farm Cotton Lands No 1575, KwaZulu Natal, all held under Titled Deed No.
T23011/2008; and
- The Remaining Extent of Portion 1171 and the Remaining Extent of
Portion 1199 of the Farm Cotton Lands No. 1575, all held under Title Deed
No. T23012/2008,
in total measuring approximately 20,2025 hectares, together with all
improvements thereon, (collectively "the Canelands Property") but
excluding all plant and equipment specifically related to the production
of paint, agricultural chemicals and related activities which are the
property of ChemSpec or ChemSpec`s current tenant ("the Disposal" or
"Transaction").
On 2 April 2009, ChemSpec and the Purchaser entered into a written
agreement of lease in respect of the Canelands Property ("ChemSpec
Lease") details of which are set out in paragraph 6 below. The Disposal
and the ChemSpec Lease are collectively referred to as the Transaction.
On 30 April 2009, the independent directors on the Chemspec board of
directors approved the Transaction subject to the fulfilment of the
conditions precedent set out in paragraph 5 below.
The effective date of the Disposal is the date on which ChemSpec`s existing
mortgage bonds registered over the Canelands Property are cancelled, the
transfer of the Canelands Property into the name of the Purchaser takes
place and a first mortgage bond over the Canelands Property is registered in
favour of Nedbank Limited by the Purchaser ("Transfer Date").
The Disposal is a related party transaction as defined in Section 10 of the
JSE Limited ("JSE") Listings Requirements and the ChemSpec board has
appointed an independent adviser to advise on whether the terms and
conditions of the Disposal are fair to the ChemSpec shareholders other than
the related parties as set out in paragraph 7 below.
2. Nature of the Canelands Property and rationale
The Canelands Property comprises of land, buildings and equipment in
Canelands, Durban which is currently being used as the company`s global
headquarters. ChemSpec entered into an agreement on 11 June 2007 to acquire
the Canelands Property from Dow AgroSciences Southern Africa (Proprietary)
Limited ("Dow") for a purchase consideration of R70 million. The Canelands
Property comprises owner-occupied property as well as investment property, a
portion of which is being leased back to Dow under an operating lease.
The directors resolved in September 2008 to dispose of the Canelands
Property on the basis of a sale and operating leaseback to realise the value
embedded in the Canelands Property for purposes of reducing the level of
debt.
3. Purchase consideration
The purchase consideration amounts to R130.0 million (excluding value added
taxation) which will be settled in cash as follows:
- R7.5 million was paid to the Conveyancing Attorneys on signature of the
Agreement; and
- The balance of the purchase consideration and value added taxation will
be paid on the Transfer Date.
4. Application of proceeds
The proceeds will be used for working capital and to settle the existing
mortgage bond over the Canelands Property.
5. Conditions precedent
The Disposal is subject to the fulfilment of, inter alia, the following
remaining major conditions precedent:
- obtaining the necessary statutory and regulatory approvals in respect
of the Transactions; and
- approval of the Disposal by ChemSpec shareholders in general meeting in
accordance with Section 10 of the JSE Listings Requirements.
6. ChemSpec Lease
ChemSpec has entered into a standard triple net single tenant lease
agreement with the Purchaser in respect of the Canelands Property. The terms
of the ChemSpec Lease are as follows:
- ChemSpec will be responsible for all repairs, insurance, building
operating costs, utility services, connection costs, rates
and maintenance of the Canelands Property;
- the term of the ChemSpec Lease is ten years with a renewal period of a
further ten years after the expiry of the initial lease period at a market
related rental and escalation at the time;
- the commencement date of the ChemSpec Lease is the date of registration
of the transfer of the Canelands Property into the name of the Purchaser, if
the commencement date is the first day of the month or the first day of the
month in which the commencement date arrives, if the commencement date is
not the first day of a month; and
- the commencement basic net monthly rental is R1 350 000 plus VAT, which
will escalate annually at a market related rate.
7. Related party
The Transaction is classified as a related party transaction in terms of the
JSE Listings Requirements due to the following:
- Mr Strath Wood, the Chief Executive of ChemSpec, is the director of
Zevoli; and
- Mr Strath Wood is the sole shareholder of Dream Weaver Trading 382
(Proprietary) Limited, a 25% shareholder of Zevoli; and
- Corvest 6 (Proprietary) Limited, a major shareholder of ChemSpec, is a
75% shareholder of Zevoli.
8. Financial effects
The table below sets out the unaudited pro forma financial effects of the
Transaction on ChemSpec. The unaudited pro forma financial effects are
presented for illustrative purposes only and because of their nature may not
give a fair reflection of ChemSpec`s financial position or results of
operations after the Transaction has been implemented. The unaudited pro
forma financial effects are the responsibility of the directors of ChemSpec.
It has been assumed for purposes of the pro forma financial effects that the
Transactions took place with effect from 1 April 2008 for income statement
purposes and 30 September 2008 for balance sheet purposes.
Before 1 After % Change
Published Pro forma
Basic Earnings per share 9.05 10.07 2 11.29
(cents)
Headline earnings per 5.75 6.36 2 10.50
share (cents)
Net asset value per share 52.39 52.80 3 0.78
(cents)
Tangible net asset value 41.58 41.99 3 0.98
per share (cents)
Number of shares in issue 310 000 310 000
(000`s)
Weighted average number of 301 945 301 945
shares in issue (000`s)
Notes:
1. The "Before" financial information has been extracted without
adjustment from the published interim results of ChemSpec for
the six months ended 30 September 2008.
2. Earnings and headline earnings per share have been adjusted to include
the following:
a. the profit on the sale of the Canelands Property calculated using an
estimated value of the ChemSpec Property of R128.5 million
at the date of sale; and
b. it has been assumed that the proceeds on the sale of the Canelands
Property will be utilised to settle the mortgage bond and
a portion of the bank overdraft and this resulted in a reduction
in the finance charges raised during the period.
3. The net asset and net tangible asset values per share have been
adjusted for the following:
a. the profit on sale of the Canelands Property;
b. the reduction in non-current assets held for sale;
c. the reduction in the mortgage bond over the Canelands Property and a
portion of the bank overdraft;
d. the deferred taxation liability raised in respect of the Canelands
Property has been recognised as a current taxation liability subsequent to
the disposal;
e. value added taxation relating to the disposal of the Canelands Property
has been raised as a current liability.
9. Documentation and notice of a ChemSpec shareholders general meeting
The Transaction is a Category 1, related party transaction for ChemSpec in
terms of section 9.5(b) and Section 10 of the JSE Limited ("JSE") Listings
Requirements. A circular containing the information required in terms of the
JSE Listings Requirements and incorporating a notice of a ChemSpec
shareholders` general meeting to approve the Transaction will be posted to
ChemSpec shareholders within 28 days of this announcement.
The related parties and their associates, as set out in paragraph 7 above,
will be taken into account in determining a quorum at the general meeting,
but their votes will not be taken into account in determining the voting at
such meting in relation to any resolution in connection with the
Transaction.
10. Withdrawal of cautionary
Shareholders are advised that caution is no longer required when dealing in
the shares issued by ChemSpec.
Durban
4 May 2009
Designated Advisor
QuestCo Sponsors (Pty) Ltd
Date: 04/05/2009 17:21:09 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
