| Wed 4 Apr 2001, 0:00 | | Hyprop/kh Props - Merger Of Operations |
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HYPROP INVESTMENTS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1987/005284/06)
("Hyprop")
KIRCHMANN-HURRY PROPERTIES LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1990/004210/06)
("KH Props")
MERGER OF OPERATIONS
1. INTRODUCTION
Combined unitholders are referred to the joint cautionary announcement
published on Tuesday, 6 March 2001, when it was announced that Hyprop, subject
to certain conditions precedent, is to acquire the business of the KH Props
group as a going concern ("the transaction") in exchange for 21 360 722 Hyprop
combined units ("the Hyprop consideration units"), which will rank pari passu
with the existing Hyprop combined units in issue, and Hyprop assuming the
liabilities of KH Props relating to the transaction.
It was further announced that KH Props combined unitholders would receive 57
Hyprop consideration units for every 100 KH Props combined units held ("the
distribution"). The distribution is to be effected through the repayment of the
KH Props debentures and a distribution in anticipation of the voluntary
winding-up of KH Props by KH Props shareholders in terms of sections 349 and
350 of the Companies Act, 1973 (Act 61 of 1973), as amended ("the Act") ("the
voluntary winding-up").
2. THE VOLUNTARY WINDING-UP OF KH PROPS
2.1 Conditions precedent to the distribution and the voluntary winding-up
The voluntary winding-up is conditional upon the following:
- the implementation of the transaction;
- the approval by shareholders at the general meeting of the necessary special
and ordinary resolutions to place KH Props into voluntary winding-up; and
- the registration by the Registrar of Companies of the special resolutions
referred to above.
2.2 Final liquidation distribution
The directors of KH Props are of the view that it would be prudent to retain an
amount of R500 000 to cover any unforeseen liabilities that may arise in the
course of the voluntary winding-up.
After effecting the distribution and settling all of KH Props' liabilities that
may come to light during the voluntary winding-up, any remaining cash will be
distributed to shareholders by way of a final liquidation distribution. It is
not anticipated, however, that the final liquidation distribution will be
material.
3. FINANCIAL EFFECTS OF THE TRANSACTION
3.1 Hyprop pro-forma financial effects
The pro-forma financial effects of the transaction on Hyprop earnings and net
asset value are illustrated in the table below.
Before After
Per Hyprop Per Hyprop
Combined unit combined unit Change
(cents) (cents) (%)
Earnings(1) 119.95 135.81 13.23
Headline earnings(1) 119.95 120.69 0.62
Net asset value(2) 690.97 817.39 18.30
Net tangible asset value(2) 690.97 817.39 18.30
Revalued net asset value(3) 1 075.01 1 074.68 (0.03)
Assumptions:
1. The earnings and headline earnings per Hyprop combined unit, as set out in
the "Before" column of the table, are based upon the audited financial results
for the twelve-month period ended 31 December 2000. The earnings and headline
earnings per Hyprop combined unit, as set out in the "After" column of the
table, are based upon the assumption that the transaction was implemented on 1
January 2000 and that the Hyprop consideration units were issued in full on
that date. KH Prop's earnings and headline earnings for the period 1 October
1999 to 30 September 2000 have been used.
In addition, adjustments of R1.455 million and R1.955 million in respect of
earnings per Hyprop combined unit and headline earnings per combined unit,
respectively, have been made to account for certain differences between the
accounting policies of Hyprop and KH Props. No adjustments have been made for
the tax effects thereof as they are not expected to be material.
2. The net asset value and tangible net asset value per Hyprop combined unit,
as set out in the "Before" column of the table, are based upon the audited
balance sheet at 31 December 2000. The net asset value and tangible net asset
value per Hyprop combined unit, as set out in the "After" column of the table,
have been based on the assumption that the transaction was implemented on 31
December 2000 and that the Hyprop consideration units were issued in full on
that date at an issue price of 1 074 cents per Hyprop consideration unit.
An adjustment of R3 million has been made in respect of a provision for
preliminary costs arising as a result of the transaction. This provision will
be capitalised against the cost of the properties acquired by Hyprop.
3. The revalued net asset value per Hyprop combined unit, as set out in the
"Before" column of the table, is based on the revalued Hyprop property
portfolio. The revalued net asset value per Hyprop combined unit, as set out
in the "After" column of the table, are based on the revalued property
portfolio of Hyprop after the implementation of the transaction. The valuation
of the property portfolio of Hyprop was prepared by an independent expert. The
revaluation of this portfolio is not in accordance with the accounting policies
of Hyprop and the calculation of net asset value at current valuation has been
provided for information purposes only.
3.2 KH Props pro-forma financial effects
The pro-forma financial effects of the transaction on KH Props earnings and net
asset value are illustrated in the table below.
Before After
Per KH Props Per KH Props
Combined combined
Unit unit Change
(cents) (cents) (%)
Earnings(1) 99.65 77.41 (22.32)
Headline earnings(1) 74.87 68.79 (8.12)
Net asset value(2) 524.74 465.91 (11.21)
Net tangible asset value(2) 524.74 465.91 (11.21)
Revalued net asset value(3) 630.32 612.57 (2.82)
Assumptions:
1. The earnings and headline earnings per KH Props combined unit, as set out in
the "Before" column of the table, are based upon the audited financial results
for the twelve-month period ended 30 September 2000. The earnings and headline
earnings per KH Props combined unit, as set out in the "After" column of the
table, are based upon the assumption that the transaction was implemented on 1
October 1999 and that the Hyprop consideration units were issued in full on
that date. Hyprop's earnings and headline earnings for the period 1 January
2000 to 31 December 2000 have been used.
In addition, adjustments of R1.455 million and R1.955 million in respect of
earnings per Hyprop combined unit and headline earnings per combined unit,
respectively, have been made to account for certain differences between the
accounting policies of Hyprop and KH Props. No adjustments have been made for
the tax effects thereof as they are not expected to be material.
2. The net asset value and tangible net asset value per KH Props combined unit,
as set out in the "Before" column of the table, are based upon the audited
balance sheet at 30 September 2000. The net asset value and tangible net asset
value per KH Props combined unit, as set out in the "After" column of the
table, have been based on the audited balance sheet of Hyprop at 31 December
2000 assuming that the transaction was implemented on 30 September 2000 and
that the Hyprop consideration units were issued in full on that date at an
issue price of 1 074 cents per Hyprop consideration unit.
An adjustment of R3 million has been made in respect of a provision for
preliminary costs arising as a result of the transaction. This provision will
be capitalised against the cost of the properties acquired by Hyprop.
3. The revalued net asset value per KH Props combined unit, as set out in the
"Before" column of the table, is based on the revalued KH Props property
portfolio. The revalued net asset value per KH Props combined unit, as set out
in the "After" column of the table, are based on the revalued property
portfolio of Hyprop after the implementation of the transaction. The valuation
of the property portfolios of both KH Props and Hyprop were prepared by an
independent expert. The revaluation of these portfolios is not in accordance
with the accounting policies of either KH Props or Hyprop and the calculation
of the revalued net asset value has been provided for information purposes only
4. AMENDMENTS TO KH PROPS' ARTICLES OF ASSOCIATION
The directors of KH Props propose that the articles of association of KH Props
be amended to include articles:
- authorising the directors of KH Props to make payments of any kind to KH
Props combined unitholders as contemplated in terms of section 90 of the Act
instead of the limited right to make payments currently contained in KH Props'
articles of association; and
- authorising the directors of KH Props, to the extent necessary, to resolve
that the company reduce its share capital, stated capital and any capital
redemption reserve fund or any other share premium account whether accompanied
by a payment to KH Props shareholders in the form of a dividend or without any
payment to KH Props shareholders.
5. ADOPTION BY HYPROP OF A NEW MEMORANDUM AND ARTICLES OF ASSOCIATION
In view of the recent changes to the Act, which necessitate certain amendments
to the company's articles of association, it is considered an appropriate time
to adopt a new set of articles of association and, at the same time, a new
memorandum of association.
Hyprop's new articles of association will include, inter alia, an article
authorising Hyprop and its subsidiaries to acquire Hyprop combined units in any
way prescribed or permitted by law, subject to the Listing Requirements of the
JSE Securities Exchange South Africa, and an article providing for the increase
of Hyprop's borrowing powers from 25% to 50% of its directors' bona fide
valuation of the property portfolio of Hyprop and its subsidiaries.
The proposed amendment will enable Hyprop to take advantage of acquisition and
development opportunities in the future by allowing the directors of Hyprop to
raise finance if such opportunities arise.
6. OPINIONS, RECOMMENDATIONS AND UNDERTAKINGS
Meyer Wilson Marsh Inc., the independent advisor to KH Props, has considered
the terms and conditions of the transaction in so far as the transaction
pertains to KH Props combined unitholders. Meyer Wilson Marsh Inc. is of the
opinion that the terms and conditions of the transaction are fair and
reasonable to KH Props combined unitholders.
In terms of the Securities Regulation Code on Takeovers and Mergers, Coronation
Capital Property Investments Limited, The Standard Bank of South Africa
Limited, through its Standard Bank Properties Division, and The Redefine Income
Fund Limited are related parties to KH Props, being material combined
unitholders in both Hyprop and KH Props ("the related parties"). The related
parties have undertaken to refrain from voting at the KH Props general meeting
of shareholders in respect of the ordinary resolution to be proposed thereat to
approve the transaction.
The board of directors of Hyprop is of the opinion that the terms and
conditions of the transaction are fair and reasonable to Hyprop combined
unitholders. Accordingly, the directors of Hyprop recommend that Hyprop
combined unitholders vote in favour of the resolutions to be proposed at the
general meetings of Hyprop shareholders and Hyprop debenture holders to approve
the transaction and undertake to vote in favour of the transaction in respect
of the combined units that they hold or control.
The board of directors of KH Props is of the opinion that the terms and
conditions of the transaction are fair and reasonable to KH Props combined
unitholders. Accordingly, the directors of KH Props recommend that KH Props
combined unitholders vote in favour of the resolutions to be proposed at the
general meetings of KH Props shareholders and KH Props debenture holders to
approve the transaction and undertake to vote in favour of the transaction in
respect of the combined units that they hold or control.
7. SALIENT DATES AND TIMES
The salient dates and times of the transaction for Hyprop combined unitholders
and KH Props combined unitholders are set out in the table below.
2001
Last day for Hyprop shareholders to
lodge forms of proxy in respect of
the resolutions to be proposed at
the general meeting of Hyprop
shareholders by not later than 10:00 on Wednesday, 25 April
Last day for Hyprop debenture holders to lodge
forms of proxy in respect of the resolutions
to be proposed at the general meeting
of Hyprop debenture holders
by not later than 10:30 on Wednesday, 25 April
Last day for KH Props debenture holders
to lodge forms of proxy in respect of
the resolutions to be proposed at the
general meeting of KH Props debenture holders
by not later than 14:00 on Wednesday, 25 April
Last day for KH Props shareholders to lodge
forms of proxy in respect of the resolutions
to be proposed at the general meeting
of KH Props shareholders by
not later than 14:30 on Wednesday, 25 April
General meeting of Hyprop shareholders
to be held at 10:00 on Monday, 30 April
General meeting of Hyprop debenture holders
to be held at 10:30 on Monday, 30 April
General meeting of KH Props debenture holders
to be held at 14:00 on Monday, 30 April
General meeting of KH Props shareholders
to be held at 14:30 on Monday, 30 April
Results of the Hyprop general meetings
and KH Props general meetings
to be published in the press on Thursday, 3 May
Announcement in the press regarding the
To be published in
transaction becoming unconditional (See note 3) the press
Last day for participation in the distribution To be published in
(See note 3) the press
Suspension of the listing of KH Props
combined units on the JSE at
the close of trading on To be published in
(See note 2 and 3) the press
Expected date of transfer of the Hyprop
consideration units into the names of
combined unitholders and posting of combined unit To be published in
certificates (See note 3) the press
The listing of the Hyprop consideration units To be published in
on the JSE (See note 3) the press
Note:
1. The dates and times set out in the table above are subject to amendment.
Any amendment to the dates and times will be published in the press.
2. All transactions on the JSE in the week prior to this date will be for
immediate settlement.
3. These dates and times cannot be determined until such time as the
transaction becomes unconditional. Once the transaction becomes unconditional,
a further announcement containing salient dates and times will be published in
the press.
7. WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
The documentation relating to the transaction will be sent to Hyprop combined
unitholders and documentation relating to the transaction, the distribution and
the voluntary winding-up will be sent to KH Props combined unitholders on or
about 7 April 2001.
Accordingly, Hyprop combined unitholders and KH Props combined unitholders are
no longer advised to exercise caution when dealing in their combined units.
Johannesburg
4 April 2001
Corporate advisors and sponsor to Hyprop
CORPCAPITAL CORPORATE FINANCE
Corporate law advisors and consultants to Hyprop and KH Props
EDWARD NATHAN & FRIEDLAND (PROPRIETARY) LIMITED
(Registration number
1999/026464/07)
Merchant bank and sponsor to KH Props
SCMB
(A division of The Standard Bank of South Africa Limited)
(Registration number 1962/000738/06)
Reporting accountants and auditors to Hyprop
Grant Thornton Kessel Feinsein
Reporting accountants and independent advisors to KH Props
Meyer Wilson Marsh Inc
(Registration number 1979/002154/21)
