| Thu 2 Feb 2012, 17:00 | | NEP - New Europe Property Investments plc - Acquisition of Modatim |
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NEP
NEP
NEP - New Europe Property Investments plc - Acquisition of Modatim
Investment S.A. , Modatim Properties S.A. and Modatim Business Facility
S.A.
New Europe Property Investments plc
(Incorporated and registered in the Isle of Man with registered number
001211V)
(Registered as an external company with limited liability under the laws of
South Africa, registration number 2009/000025/10)
AIM share code: NEPI
BVB share code: NEP
JSE share code: NEP
ISIN: IM00B23XCH02
("NEPI" or "the Company")
ACQUISITION OF MODATIM INVESTMENT S.A. ("MTI"), MODATIM PROPERTIES S.A.
("MTP") AND MODATIM BUSINESS FACILITY S.A. ("MTBF")
INTRODUCTION
Shareholders are advised that NEPI through its subsidiaries NEPI FOUR TOWER
BUILDING S.R.L. ("NEPI FOUR"), NEPI FIVE OFFICE TOWER S.R.L. ("NEPI FIVE")
and NEPI BUCHAREST TWO S.R.L. ("NEPI TWO") (collectively, "the
Purchasers") has concluded agreements for the acquisition of all the issued
shares in and shareholders` claims against MTI and MTP from MTInv Holding
BV and Mr. Ovidiu Sandor (collectively, "the Sellers") ("the Transaction").
Shareholders are further advised that NEPI has through another subsidiary,
NE Property Cooperatief UA ("NEPI Coop"), concluded an agreement for the
forward acquisition of all the issued shares in and shareholders` claims
against MTBF from the Sellers ("the Forward Transaction").
MTP and MTI own three adjoining office buildings (collectively, "the
properties" or "City Business Centre") of some 27,150 square metres located
in the centre of Timisoara, Romania, while MTBF owns land on which two
further adjoining office blocks of some 20,000 square metres are in the
process of being developed (collectively, "the development properties"),
also located in Timisoara.
RATIONALE FOR THE TRANSACTION AND THE FORWARD TRANSACTION
Timisoara is the fourth largest city in Romania with a population in excess
of 315,000 and is home to a growing back-office activities-and-services
market that offers a skilled labour force, low costs and proximity to
Western Europe. Tenants in the properties include Alcatel, Deloitte, IBM,
Microsoft, PWC, Raiffeisen Bank and Unicredit. A number of international
tenants, including Autoliv and SAP, have indicated interest in the
development properties.
As indicated in the financial effects set out below, it is expected that
the acquisition of the properties and the development properties will
contribute to the growth in distributable earnings for NEPI shareholders.
SALIENT TERMS OF THE TRANSACTION AND THE FORWARD TRANSACTION
The effective date of the Transaction is 1 January 2012 ("the Effective
Date").
The acquisition agreement in respect of the Forward Transaction is binding
on the date of transfer of the shares in MTI and MTP. However, delivery of
the shares in MTBF only occurs on a date six months after the last
development building has been completed ("Completion Date"), expected to be
no later than 30 September 2014, subject to fulfilment of the conditions
precedent set out below.
The aggregate purchase price for the shares in and shareholders` claims
against MTI and MTP is an amount of approximately EUR16.55 million ("the
Estimated Transaction Purchase Price"), which will be funded through the
proceeds of a vendor consideration placing in terms of which 5,518,057 new
ordinary NEPI shares will be issued and placed at EUR3.00 per share ("the
Vendor Placing").
The acquisition agreement for MTI and the acquisition agreement for MTP are
inter-conditional.
The final purchase price in relation to the Transaction ("the Transaction
Price") will be determined formulaically in terms of the acquisition
agreements taking into account the current net operating incomes of the
properties, the outstanding loan balances with third party financiers, the
present values of the rent free periods and tenant installations, the
financial statements of MTI and MTP as at the Effective Date and the
additional incomes to be contracted within the 24 month period from the
Effective Date. In so far as there is a difference between the Transaction
Price and the Estimated Transaction Purchase Price, adjustment amounts will
be paid between the Purchasers and the Sellers, in four semi-annual
installments over the course of the above mentioned 24 month period.
The final purchase price in relation to the Forward Transaction ("the
Forward Transaction Price") will be determined formulaically in terms of
the acquisition agreement taking into account the net operating incomes of
the development properties as at the Completion Date and the financial
statements of MTBF as at the Completion Date, as well as the additional net
operating incomes to be contracted within the development properties in the
12 months following the Completion Date, subject to a maximum Forward
Transaction Price of EUR46 million.
The acquisition agreements for the Transaction and the Forward Transaction
contain warranties typical for acquisitions of this nature.
The Transaction is not subject to any outstanding conditions precedent and
is expected to complete before 1 March 2012.
The Forward Transaction is subject to fulfilment of the following
conditions precedent:
- the development buildings being constructed and completed in
accordance with Romanian regulations and the development
properties being constructed and completed in compliance with
technical specifications set out in the Forward Transaction
acquisition agreement, including all utilities serving the
development properties being in place and operational as attested
to by a technical advisor;
- all approvals such as permits, authorities, consents, licenses
and the like, being obtained;
- MTBF obtaining confirmation from all the contractors having
contracts exceeding EUR500,000 (per development property), that
there are no outstanding amounts owed to them by MTBF, or MTBF
providing proof of full payments of the amounts due under such
contracts;
- the contractors having delivered financial guarantees in relation
to quality and defects of works, for at least 5% of contract
value;
- the loans received by MTBF from its shareholders and the project
finance for the development of the development properties meet
the requirements specified in the Forward Transaction acquisition
agreement;
- the Banca Comerciala Romana S.A. letter of guarantee having been
terminated; and
- the Sellers notifying the Purchasers that the completion
warranties relating to the shareholders` title of the shares in
MTBF and MTBF`s title over the development properties are valid,
correct, true and accurate.
THE PROPERTIES
Details of the properties including the valuation, effective as at 1
January 2012 attributed to the properties by the Company, are as follows:
Weighted Rentable Purchase Valuation
average area price
rental
per m2
Property Region Sector (EUR) m2 (EUR` (EUR`
description million) million)
City Timisoara, Office 13.1 27,150.5 16.55 45.64
Business Romania
Centre
FINANCIAL EFFECTS
The unaudited pro forma financial effects have been prepared for
illustrative purposes only to provide information on how the Transaction
may have impacted on the historical financial results of NEPI for the six
months ended 30 June 2011, adjusted for the effects of the NEPI rights
offer which was concluded in December 2011. Due to their nature, the
unaudited pro forma financial effects may not fairly present NEPI`
financial position, changes in equity, results of operations or cash flows
after the Transaction. The unaudited pro forma financial effects are the
responsibility of the directors of NEPI. The unaudited pro forma financial
effects have not been reviewed or reported on by NEPI`s auditors.
The unaudited pro forma financial effects have been prepared in accordance
with the accounting policies of NEPI that were used in the preparation of
the unaudited interim results for the six months ended 30 June 2011.
No pro forma financial effects have been presented in respect of the
Forward Transaction as the construction of the development properties has
not been completed and accordingly there is no factually supportable
information regarding the letting of the development properties.
Before the After the Change
Transaction Transaction after the
Note 1 Transaction
(%)
Basic weighted average 8.89 9.11 2.47
earnings per share (EUR cents)
Diluted weighted average 8.36 8.60 2.87
earnings per share (EUR cents)
Distributable earnings per 9.23 10.06 9.00
share (EUR cents)
Headline earnings per share 8.89 9.11 2.47
(EUR cents)
Diluted headline earnings per 8.36 8.60 2.87
share (EUR cents)
Net asset value per share 2.37 2.40 1.27
(EUR)
Adjusted net asset value per 2.39 2.42 1.26
share (EUR)
Net tangible asset value per 2.23 2.24 0.45
share (EUR)
Weighted average number of 90,249,316 95,767,523 6.11
shares in issue
Diluted weighted average 95,914,346 101,432,553 5.75
number of shares in issue
Number of shares in issue for 97,118,663 102,636,870 5.68
net asset value and net
tangible asset value per share
purposes
Number of shares in issue for 102,783,693 108,301,900 5.37
adjusted net asset value per
share purposes
Notes and assumptions:
1. The amounts set out in the "Before the Transaction" column have
been extracted from the "After the rights offer" column which was
set out in the rights offer declaration announcement published on
SENS, RNS and the Bucharest Stock Exchange on 21 October 2011.
2. The Transaction is assumed to have been implemented on 1 January
2011 for basic weighted average earnings, diluted weighted
average earnings, distributable earnings, headline earnings and
diluted headline earnings per share purposes and on 30 June 2011
for net asset value, adjusted net asset value and net tangible
asset value per share purposes.
3. The amounts set out in the "After the Transaction" column were
calculated by consolidating the results of NEPI for the six
months ended 30 June 2011 (after taking into account adjustments
for the rights offer concluded in December 2011) and the
management accounts of MTI and MTP for the six months ended 31
December 2011, subject to the assumptions and adjustments set out
below. The management accounts of MTI and MTP have not been
reviewed or reported on by reporting accountants. However, the
directors of NEPI are satisfied with the quality of the
information:
3.1 MTI and MTP were acquired at the Estimated Transaction
Purchase Price of approximately EUR16.55 million, financed
through the Vendor Placing.
3.2 For the six months to 31 December 2011, MTI and MTP earned
consolidated historical net rental income of approximately
EUR1.75 million, incurred non-property related expenditure
of approximately EUR9,000 and incurred interest on external
bank debt of approximately EUR0.59 million. MTI and MTP
earned a consolidated profit before tax for the six month
period to 31 December 2011 of EUR1.153 million.
3.3 The additional distributable income which results from the
Transaction is assumed to be earned evenly throughout the
six months ended 30 June 2011.
3.4 Estimated transaction costs of EUR450 000 were expensed in
accordance with IFRS 3 (Business Combinations) 2008.
3.5 The value of the combined net assets of MTI and MTP as at 31
December 2011 are EUR13.87 million.
3.6 The acquisition of MTI and MTP has been accounted for under
IFRS 3 (Business Combinations) Revised whereby accounts and
other receivables, trade and other payables, deferred
taxation and goodwill have been recognised.
3.7 An amount of EUR3.26 million was recognised in goodwill.
3.8 An amount of EUR3.26 million was recognised as a deferred
taxation liability.
3.9 NEPI assumed external bank debt of EUR29.29 million which
existed in MTI and MTP at 31 December 2011.
CATEGORISATION OF THE TRANSACTION AND THE FORWARD TRANSACTION
Due to the fact that MTI, MTP and MTBF are being acquired from the same
Sellers, the Transaction and the Forward Transaction have been aggregated
in terms of the Listings Requirements of the JSE Limited and are
accordingly a category 2 transaction in terms of section 9.5(a) of the
Listings Requirements of the JSE Limited and are not subject to approval by
NEPI`s shareholders.
ISSUE OF SHARES
Application will be made for the 5,518,057 new ordinary NEPI shares to be
issued pursuant to the Vendor Placing to be admitted to trading on the JSE,
AIM and the BVB, with dealings expected to commence on 10 February 2012.
2 February 2012
For further information please contact:
New Europe Property Investments plc +40 74 432 8882
Martin Slabbert
Nominated Adviser and Broker +44 20 7131 4000
Smith & Williamson Corporate Finance Limited
Azhic Basirov/Siobhan Sergeant
JSE sponsor +27 11 283 0042
Java Capital
Romanian advisor +40 21 222 8731
SSIF Intercapital Invest SA
Razvan Pasol
Date: 02/02/2012 17:00:02 Produced by the JSE SENS Department.
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