| Fri 21 Oct 2011, 17:53 | | QPG - Quantum Property Group Limited - Acquisition Of 50% Of 15 On Orange Hotel |
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QPG
QPG
QPG - Quantum Property Group Limited - Acquisition Of 50% Of 15 On Orange Hotel
(Proprietary) Limited
QUANTUM PROPERTY GROUP LIMITED
Incorporated in the Republic of South Africa
(Registration number 1984/002788/06)
Share code: QPG ISIN: ZAE000125647
("QPG" or "the Company")
ACQUISITION OF 50% OF 15 ON ORANGE HOTEL (PROPRIETARY) LIMITED
1. INTRODUCTION
The board of directors of QPG ("the Board") is pleased to advise shareholders
that a Sale of Shares Agreement, dated 6 September 2011, and a First Addendum to
the Sale of Shares Agreement, dated 18 October 2011 ("the Agreement"), has been
entered into between A Million Up Investments 105 (Proprietary) Limited ("AMU"),
a wholly-owned subsidiary of QPG, 15 on Orange Hotel (Proprietary) Limited ("15
on Orange"), a joint venture of AMU and Protea Hospitality Group (Proprietary)
Limited ("Protea").
In terms of the Agreement, AMU will acquire the remaining 50% of the issued
share capital ("sale shares") in 15 On Orange and certain claims ("sale claims")
against 15 On Orange from Protea ("the Acquisition").
2. THE ACQUISITION
2.1 Nature of 15 On Orange
15 on Orange is the operating company that operates the African Pride 15 on
Orange Hotel ("the Hotel"), which commenced trading in December 2009. AMU owns
100% of the African Pride 15 on Orange property.
QPG previously owned a 50% share in 15 on Orange, via its wholly owned
subsidiary AMU and accounts for this investment as a joint venture. QPG accounts
for its proportionate share of 15 on Orange`s assets, liabilities, income,
expenses and cash flows on a proportionately consolidated line-by-line basis.
2.2 The rationale for the Acquisition
The Acquisition formed a key element in negotiations with Protea who have
concluded a new and extended 20 year management agreement under the premier
African Pride brand. The Board considers the Acquisition to have strategic and
significant value.
Consequently, AMU entered into an Amendment and Restatement Agreement ("ARA")
with Absa Bank Limited ("Absa") on 31 August 2011. The ARA extended the original
facilities made available by Absa to AMU in or about April 2008 for a further
five year period until 2016, and facilitated both the Acquisition and the
enhancement programme which is in line with Protea`s recommendations. As a show
of confidence in the Hotel, Protea has acquired a penthouse unit as detailed in
paragraph 2.4 below.
The Hotel enhancements include, inter alia:
* Fitting out of a 150 plus-seater multi-use,
high-specification, venue facility to complement existing meeting venues in
the Hotel;
* Furnishing and fitting out of six penthouse units for inclusion in the
Hotel room inventory - these units remain available for sale;
* Increasing dining capacity of the Hotel restaurant Savour;
* Redecoration of the Murano Bar;
* Onsite travel and tours office; and
* General exterior upgrade including the rooftop swimming pool.
2.3 Purchase consideration and effective date
The purchase consideration for the acquisition is R60 for the sale shares and
R22 000 000 for the sale claims, with the balance of such sales claims being
settled by 15 on Orange. The purchase consideration is to be settled as follows:
* R60 for the sale shares was paid on the 3rd business day after all the
conditions precedent were fulfilled ("Closing Date"); and
* R22 000 000 for the repayment of the sale claims as detailed in paragraph
2.4 below.
The effective date of the acquisition is 1 September 2011.
2.4 Repayment of loans
As at the effective date, 15 on Orange is indebted to Protea in respect of the
FF&E loan and the Working Capital loan in the amounts of R6 870 654 and R25 825
569 respectively.
The FF&E loan was for the acquisition of certain furniture, fittings and
equipment, and the Working Capital Loan provided working capital funding to 15
On Orange.
FF&E Loan
In terms of the Agreement, 15 On Orange shall repay the FF&E Loan to Protea on
or before 31 August 2012. This loan will bear interest at the Prime Rate.
Working Capital loan
Repayments of the Working Capital Loan shall be made as follows:
R11 000 000 was paid by AMU to Protea on or before the Closing Date;
Penthouse 610 forming part of African Pride 15 on Orange Hotel, valued at R11
000 000, will be sold and transferred by AMU to Protea (or its nominee), for R11
000 000 ("purchase price"); and
R3 000 000 plus the balance of the Working Capital Loan, plus interest thereon,
shall be paid by 15 On Orange to Protea on or before 31 August 2012.
2.5 Conditions precedent and the amendment of Memorandum of Incorporation
All conditions precedent have been fulfilled. The Memorandum of Incorporation of
15 on Orange will be amended, where necessary, to conform to that of QPG.
3. PRO FORMA FINANCIAL EFFECTS OF THE ACQUISITION
The table below sets out the unaudited pro forma financial effects of the
Acquisition, on QPG`s earnings per share, headline earnings per share, net asset
value per share and tangible net asset value per share.
The unaudited pro forma financial effects have been prepared to illustrate the
impact of the Acquisition on the reported financial information of QPG for the
six months ended 28 February 2011, had the Acquisition occurred on 1 September
2010 for income statement purposes and as at 28 February 2011 for balance sheet
purposes. The unaudited pro forma financial effects have been prepared using
accounting policies that comply with International Financial Reporting Standards
and that are consistent with those applied in the unaudited interim results of
QPG for the six months ended 28 February 2011 and the annual financial
statements for the year ended 31 August 2010.
The unaudited pro forma financial effects, which are the responsibility of the
directors, are provided for illustrative purposes only and, because of their pro
forma nature may not fairly present QPG`s financial position, changes in equity,
results of operations or cash flow.
Before the After Percent
Acquisition the age
Acquisit change
ion (%)
Basic loss per share (cents) (8.27) (9.29) (12.33)
Headline loss per share (cents) (8.27) (9.29) (12.33)
Net asset value per share 260.24 254.18 (2.3)
(cents)
Tangible net asset value per 260.24 254.18 (2.3)
share (cents)
Weighted average number of 152 944 152 944 0
shares in issue (000`s)
Notes:
1. The amounts in the "Before the Acquisition" column relate to the unaudited
interim results of QPG for the six months ended 28 February 2011.
2. The amounts in the "After the Acquisition" column reflect the financial
effects of the Acquisition on QPG as if it had occurred on 1 September 2010 for
income statement purposes and on 28 February 2011 for balance sheet purposes.
3. The effects on basic earnings per share and headline earnings per share are
calculated based on the assumption that the Acquisition was effected on 1
September 2010.
4. The effects on net asset value per share and tangible net asset value per
share are calculated based on the assumption that the Acquisition was effected
as at 28 February 2011.
4 CLASSIFICATION OF THE ACQUISITION AND FURTHER DOCUMENTATION
In terms of the Listings Requirements of JSE Limited, the acquisition is
classified as a category 2 transaction
21 October 2011
Designated Adviser
Merchantec Capital
Date: 21/10/2011 17:53:27 Produced by the JSE SENS Department.
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