| Wed 23 Mar 2011, 10:17 | | RIN - Redefine Properties International Limited - Potential Merger and Further |
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RIN
RIN
RIN - Redefine Properties International Limited - Potential Merger and Further
Cautionary Announcement
Redefine Properties International Limited
(formerly Kalpafon Limited)
(Incorporated in the Republic of South Africa)
(Registration number 2010/009284/06)
JSE share code: RIN ISIN Code:ZAE000149282
("RIN" or "the company")
POTENTIAL MERGER AND FURTHER CAUTIONARY ANNOUNCEMENT
INTRODUCTION
Linked unitholders are referred to the previous cautionary announcements
released on SENS by RIN, the last of which was released on 14 February 2011, and
to the announcement ("the RNS announcement") which was released by Redefine
International plc ("RI plc"), the AIM-listed subsidiary of RIN, on the
Regulatory News Service ("RNS") of the London Stock Exchange today (a copy of
which is being released simultaneously with this announcement) regarding the
potential merger ("the potential merger") between RI plc and Wichford P.L.C
("Wichford").
As set out in the RNS announcement, the boards of Wichford and RI plc have
reached an in principle understanding regarding a potential combination of the
two companies to create an enlarged company ("the enlarged company").
STATUS OF THE RNS ANNOUNCEMENT
The purpose of the RNS announcement is to record the terms of a possible offer
by Wichford and accordingly does not create obligations on Wichford to make an
offer to acquire all of the RI plc shares from all of the RI plc shareholders.
RATIONALE FOR THE POTENTIAL MERGER
As set out in the RNS announcement, the potential merger would create an
enlarged, income-focused investment property company with a large, well
diversified investment property portfolio listed on the main market of the
London Stock Exchange. The enlarged company would have an improved capital
structure benefiting from RI plc`s attractive long term debt facilities as well
as the commitment from RIN and its holding company (Redefine Properties Limited
("Redefine Properties")) to support a capital raise by the enlarged company in
the future, if so required (see the "potential capital raising" section below).
In particular, the boards of directors of Wichford and RI plc believe that the
potential merger represents a clear and strong complementary fit, creating a
company in the mid-tier of the UK listed property sector with:
- good growth prospects, an improved capital structure and better access to
capital;
- complementary income focused property portfolios, diversified by geography,
asset and tenant type;
- an enlarged shareholder base which may enhance trading liquidity for shares
in the enlarged company; and
- potential for reduced combined expenses as a result of the elimination of
certain public company costs.
The enlarged company would seek to change its year end from 30 September to 31
August and distribute semi-annual dividends, in keeping with RI plc`s existing
dividend policy. Accordingly, RIN will continue to make interest distributions
twice yearly in respect of the periods ended 28 February and 31 August in terms
of the company`s debenture trust deed.
PROPOSED TERMS OF THE POTENTIAL MERGER AND CONDITIONS PRECEDENT
In terms of the potential merger, Wichford will make an offer to acquire all of
the RI plc shares in issue from all of the RI plc shareholders (including RIN)
in return for shares in Wichford on the basis of an exchange ratio of 7,2
Wichford shares for every one RI plc share held ("the offer").
Accordingly, if RIN accepts the offer (on the offer being made) and the
potential merger is implemented, RIN will dispose of its entire holding in RI
plc (approximately 82% as at 22 March 2011) in return for a holding in Wichford
(approximately 64% after the cancellation of RI plc`s existing holding in
Wichford). Wichford will in turn hold 100% of the issued shares of RI plc.
Any acceptance of the offer by RIN would be subject to:
- receipt of all necessary linked unitholder approvals (to be obtained at a
general meeting of RIN linked unitholders as further detailed below); and
- receipt of all necessary regulatory and statutory approvals including the
approval of the JSE Limited, the Takeover Regulation Panel (currently the
Securities Regulation Panel) and the South African Reserve Bank.
In addition to the conditions to the RIN acceptance of the offer, the potential
merger is subject to the following conditions precedent:
- the completion of due diligence satisfactory to Wichford;
- the unanimous recommendation of the board of RI plc;
- the unanimous recommendation of the board of Wichford;
- the agreement of RI plc and Wichford to the terms of an implementation
agreement;
- the agreement by RIN, Redefine Properties and Wichford to the terms of the
potential capital raising and the backstop capital raising commitments
(referred to in the "potential capital raising" section below);
- agreement being reached regarding satisfactory governance arrangements for
the enlarged company to be set out in the relationship agreement (see "the
relationship agreement" section below);
- RI plc shareholders receiving any interim dividend payable for the period
ended 28 February 2011 consistent with RI plc`s existing dividend policy;
- Wichford shareholders receiving an interim dividend for the six month
period ended 31 March 2011 of no less than the level of the 2010 interim
dividend of 0.32 pence per share; and
- all required United Kingdom Listing Authority and United Kingdom Takeover
Panel and other required regulatory approvals having been obtained,
including the United Kingdom Takeover Panel consenting to a whitewash given
RIN`s shareholding in the enlarged company would exceed 29.9%.
POTENTIAL CAPITAL RAISING
It is expected that the enlarged company will, in due course, seek to raise
equity capital of up to GBP100 million ("potential capital raising") to improve
the gearing of the enlarged company and to assist, inter alia, with the
refinancing of Wichford`s existing debt maturities in October 2012. The board of
the enlarged company will decide the terms of any potential capital raising at
the appropriate time with regard to the interests of all shareholders in the
enlarged company. It is currently expected that the preferred route for a
potential capital raising will involve issuing new equity at a small discount to
the market value, as is possible, to existing shareholders of the enlarged
company in proportion to their shareholdings at the time of the potential
capital raising ("fully pre-emptive capital raising").
Subject to all required linked unitholder and regulatory approvals being
obtained, RIN has undertaken to subscribe for at least its pro rata share of any
potential capital raising.
Whilst the preferred route of a potential capital raising would be the fully
pre-
emptive capital raising, as part of the terms of the potential merger and in the
event that the fully pre-emptive capital raising cannot be successfully
completed, the enlarged company will have the ability to conduct a backstop
capital raising ("backstop capital raising") by way of a deeply discounted
rights issue of up to GBP100 million of gross proceeds at an issue price not
less than the nominal value of the shares of the enlarged company.
Redefine Properties (RIN`s holding company) has agreed in principle that it will
underwrite any backstop capital raising pro rata to RIN`s shareholding in the
enlarged company at the time of the completion of the potential merger. An
underwriting fee of 2.5% will be payable to Redefine Properties for its
underwriting commitment in respect of the backstop capital raising by the
enlarged company.
The underwriting commitment by Redefine Properties in respect of the backstop
capital raising will terminate on 31 October 2012 if the backstop capital
raising is not called by this date.
THE RELATIONSHIP AGREEMENT
In terms of the merger, RIN and the enlarged company propose entering into a
relationship agreement setting out the governance arrangements for the enlarged
company.
It is envisaged that the relationship agreement will inter alia, limit the
ability of RIN and/or its associates from taking control of the board of the
enlarged company and will prevent RIN from taking actions that could result in
the de-listing of the enlarged company.
The relationship agreement will be subject to compliance with all regulatory
requirements, including specifically the JSE Listings Requirements which
provides that a company must have the ability to control the majority of its
assets.
CATEGORISATION OF THE POTENTIAL MERGER, FURTHER DOCUMENTATION AND REGULATORY
COMPLIANCE
The potential merger, if implemented, will constitute a category 1 transaction
in terms of the JSE Listings Requirements comprising:
- a category 1 disposal of the 82% holding in RI plc by RIN ("the category 1
disposal"); and
- a category 1 acquisition of the approximately 64% holding in Wichford by
RIN.
Accordingly, if Wichford proceeds with the offer RIN will be required to issue a
circular to linked unitholders containing further information as required under
the JSE Listings Requirements, including a notice convening a general meeting of
RIN linked unitholders to obtain the required linked unitholder approvals for
the disposal of the holding in RI plc and the acquisition of the holding in
Wichford.
Given that the disposal by RIN of its RI plc shareholding constitutes the sale
of all of the assets of RIN, the category 1 disposal will constitute an affected
transaction in terms of both the Companies Act (Act 61 of 1973) and the
Companies Act (Act 71 of 2008) (which is expected to come into force with effect
from 1 April 2011) and the takeover regulations thereto.
The potential merger will accordingly be required to comply with whichever act
and takeover regulations are in force at the time of the implementation of the
potential merger.
FURTHER CAUTIONARY ANNOUNCEMENT
Pending further announcements, RIN linked unitholders are advised to continue to
exercise caution in dealing in their securities until a further announcement is
made.
23 March 2011
Corporate advisor, legal advisor and sponsor to Redefine Properties
International Limited
Java Capital
Date: 23/03/2011 10:17:01 Produced by the JSE SENS Department.
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