| Wed 11 Jul 2012, 17:40 | | Don Group Ltd - DISPOSAL OF HOTEL PROPERTIES AND RENEWAL OF CAUTIONARY ANNOUNCEMENT |
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DON
DISPOSAL OF HOTEL PROPERTIES AND RENEWAL OF CAUTIONARY ANNOUNCEMENT
The Don Group Limited
Incorporated in the Republic of South Africa
(Registration number: 1946/023123/06)
Share Code: DON ISIN: ZAE000008462
(The Don or the Company)
DISPOSAL OF HOTEL PROPERTIES AND RENEWAL OF CAUTIONARY ANNOUNCEMENT
1. INTRODUCTION AND RATIONALE
The Board of directors of The Don (the Board) is pleased to inform shareholders that The Don, through
its wholly-owned subsidiary, Granport Investments Proprietary Limited (Granport or the Seller) has, as
detailed below, entered into agreement to dispose of three of its nine hotel properties, being the
properties situated at 125 Pretoria Avenue, corner Rivonia Road, Sandown, Sandton (Sandton 3), No 3
Rivonia Road, Illovo, Johannesburg (Sandton 1) and 249 Beach Road, Sea Point (Beach Road),
together with all the buildings and improvements thereon, including fittings and fixtures, for a total
purchase consideration of R77.5 million (the Disposals). The conditions precedent to the Disposals
are, the obtaining of all necessary regulatory approvals and approval by shareholders of The Don in
general meeting.
The purchase considerations for the Sandton 3, Sandton 1 and Beach Road Properties, as set out in
paragraphs 2 and 3 below respectively, were concluded at current market prices and are in excess of the
directors valuations thereof, as disclosed in the Companys annual financial statements for the year
ended 30 June 2011.
Due to the high levels of competition within the travel and leisure sector in which The Don operates,
resulting from the recent entry of numerous new hotels, as well as the expansion of existing hotels in
South Africa, profit margins are being negatively impacted and the situation is becoming increasingly
unsustainable for the Company in the long-term. Accordingly, the Board has decided to apply the
proceeds from the Disposals to reduce interest-bearing long-term debt and to subsequently move away
from owning and operating hotels and to exit the travel and leisure sector.
It is the intention of the Board, in addition to the Disposals, to dispose of The Dons remaining six hotel
properties. Accordingly, details pertaining to the Disposals and to the intended additional disposals of the
remaining hotel properties will be included in a circular to shareholders as described in paragraph 6
below.
The Board will notify shareholders regarding the future strategy of the Company following the disposal of
its various hotel properties.
2. THE DISPOSAL OF SANDTON 3 AND SANDTON 1
The Board is pleased to inform shareholders that the Seller has entered into an Agreement of Sale dated
3 July 2012 (the Sandton 3 and Sandton 1 Agreement) with Calaska Trading 35 Proprietary Limited
(Calaska) to dispose of two of its nine hotel properties being Sandton 3 and Sandton 1 together
with all the buildings and improvements thereon, including fittings and fixtures to Calaska for a purchase
consideration of R54.5 million.
2.1 Details of the Sandton 3 and Sandton 1 Properties
The Sandton 3 and Sandton 1 Properties, respectively comprise:
- Portion 2 of Erf 14 Sandown known as the Sectional Title Scheme Sandley Section 1 to 44
Sectional Plan SS 134/1989 and all common areas including parking lots and all buildings on the
Erf, which measures approximately 4 501 square metres, situated at 125 Pretoria Avenue
(corner Rivonia Road), Sandown, Sandton; and
- Re of Stand 105 Illovo which measures approximately 2 898 square metres, situated at
3 Rivonia Road, Illovo, Johannesburg.
2.2 Purchase consideration and effective date of the disposal of the Sandton 3 and Sandton 1
Properties
The total purchase consideration of R54.5 million for the Sandton 3 and Sandton 1 Properties is to
be settled by Calaska as follows:
- a deposit of R1 million payable in cash to the Sellers Conveyancers; and
- the balance of R53.5 million payable in cash free of exchange, against registration of transfer
and which will be secured by means of a bank guarantee/s acceptable to and in favour of the
Seller and/or its nominee/s. Calaska will deliver such guarantee/s to the Sellers Conveyancers
within 45 days after acceptance of the Sandton 3 and Sandton 1 Agreement by the Board.
Calaska shall take possession of the Sandton 3 and Sandton 1 Properties on the date of registration
of transfer thereof.
2.3 Other terms of the Sandton 3 and Sandton 1 Agreement
The transfer costs pertaining to the Sandton 3 and Sandton 1 Properties are to be paid to the
Sellers Conveyancers by Calaska, upon request.
The Seller shall be liable for and shall pay a brokers commission of 2.25% of the purchase price of
the Sandton 3 and Sandton 1 Properties (plus VAT) to its broker, Watprop Proprietary Limited, upon
registration of transfer of the Sandton 3 and Sandton 1 Properties, as a first draw against the
proceeds of the disposal thereof.
The Sandton 3 and Sandton 1 Properties are sold voetstoots, without any warranty as to either
patent or latent defects, and subject to such conditions mentioned or referred to in the Sellers Title
Deed and the relevant prior Title Deeds and to all such conditions and servitudes, if any, that may
exist in respect thereof.
3. THE DISPOSAL OF THE BEACH ROAD PROPERTY
The Board is pleased to inform shareholders that the Seller has entered into a Deed of Sale dated
18 May 2012 (the Beach Road Agreement) which Beach Road Agreement became binding on
28 June 2012 subsequent to the acceptance thereof by the Board - with the Tamric Trust (The Tamric
Trust or the Purchaser of the Beach Road Property) to dispose of its hotel property known as
249 Beach Road, Sea Point, together with all existing lease agreements pertaining thereto and all
improvements thereon, as well as all relevant moveable assets (Beach Road Property) to The Tamric
Trust for a purchase consideration of R23 million.
3.1 Details of the Beach Road Property
The Beach Road Property comprises Erf 1 207 Sea Point West known as 249 Beach Road, Sea
Point, which measures approximately 1 084 square metres.
3.2 Purchase consideration and effective date of the disposal of the Beach Road Property
The total purchase consideration of R23 million is to be settled by the Purchaser of the Beach Road
Property, in full, in cash and secured by a written guarantee from a registered financial institution
payable free of exchange, against registration of the Beach Road Property in the name of the
Purchaser of the Beach Road Property by 31 August 2012.
The Purchaser of the Beach Road Property shall take possession thereof on the date of registration
of transfer.
3.3 Other terms of the Beach Road Agreement
The transfer costs pertaining to the Beach Road Property shall be paid by the Purchaser of the
Beach Road Property.
The Seller shall be liable for and shall pay an agents commission of 2.25% of the purchase price of
the Beach Road Property (plus VAT) to its agent, Ryan Joffe, immediately upon registration of
transfer thereof.
The Beach Road Property is sold voetstoots and is subject to the terms and conditions and
servitudes mentioned or referred to in the current and/or prior Title Deeds and to the conditions of
establishment of the Township in which it is situated and to the zoning applied to it under any Town
Planning Scheme.
The Beach Road Property is currently being let to tenants and is being sold subject to all existing
tenancies.
4. CONDITIONS PRECEDENT OF THE DISPOSALS
The Disposals are subject to:
- the obtaining of all necessary regulatory approvals, including, inter alia, approval by the JSE Limited
(JSE); and
- approval by shareholders of The Don in general meeting.
5. PRO FORMA FINANCIAL EFFECTS OF THE DISPOSALS
The pro forma financial effects of the Disposals on the reported financial information of The Don will be
announced to shareholders in due course.
6. CATEGORISATION OF THE DISPOSALS AND FURTHER DOCUMENTATION
The Disposals constitute a Category 1 transaction in terms of section 9.5(b) of the JSE Listings
Requirements. Accordingly, a circular containing full details of the Disposals (Circular), including, inter
alia, a notice to convene a general meeting of shareholders of The Don in order to consider and, if
deemed fit to pass, with or without modification, the resolutions necessary to approve and implement the
Disposals, will be distributed to shareholders of The Don in due course.
7. RENEWAL OF CAUTIONARY ANNOUNCEMENT
Shareholders are advised that as the finalisation of the pro forma financial effects, as well as
negotiations on several of the remaining six hotel properties, are still in progress, which if successfully
concluded may have a material effect on the price of the Companys securities, they should continue to
exercise caution when dealing in the Companys securities until a further announcement is made.
Johannesburg
11 July 2012
Sponsor
Merchantec Capital
Date: 11/07/2012 05:40:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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