| Tue 24 Jul 2001, 0:00 | | Compass / Foord & Meintjes: Announcement Relating |
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property portfolio
COMPASS PROPERTY HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1987/003591/06)
("Compass" or the company")
Foord & Meintjes (Proprietary) Limited
(Incorporated in the Republic of South Africa)
(Registration number 1980/005495/07)
("Foord & Meintjes")
Announcement relating to the disposal of the property portfolio, a scheme of
arrangement and an offer to debenture holders
1. Introduction
Further to the cautionary announcement published by Compass on 30 May 2001,
Corpcapital Corporate Finance is authorised to announce that:
* Compass and its property owning subsidiaries (collectively, the "Compass
group") have concluded agreements relating to the disposal of their property
portfolio to ApexHi Properties Limited ("ApexHi") for R136 000 000 payable
in ApexHi linked units ("the disposal");
* a consortium, including Foord & Meintjes ("the consortium") is to propose
a scheme of arrangement in terms of section 311 of the Companies Act, 1973
(Act 61 of 1973), as amended ("the Companies Act"), in terms of which the
consortium is to acquire the shares in Compass not already owned by the
consortium for a consideration of 50 cents per share ("the scheme");
* Compass, or a subsidiary of Compass, is to make an offer to acquire the
debentures held by the Compass debenture holders ("the offer");
* Compass intends amending its debenture trust deed to accommodate the
requirements of the consortium ("the restructure").
Collectively, the disposal, the scheme, the offer and the restructure are
hereinafter referred to as "the transaction".
2. The disposal
The Compass group has concluded agreements with ApexHi in terms of which it
is to dispose of its entire property portfolio as well as certain of its
current assets and liabilities with effect from 1 July 2001, for an amount
of R136 000 000, to be settled as follows:
* R81 600 000 by the issue of 13 600 000 "A" class ApexHi linked units at
an issue price of R6,00 per unit;
* R54 400 000 by the issue of 13 600 000 "B" class ApexHi linked units at
an issue price of R4,00 per unit,
("the consideration units"). Compass shareholders and debenture holders are
referred to the ApexHi announcement published simultaneously with this
announcement which provides further details on the nature of the
consideration units.
3. The scheme
The consortium (which owns approximately 19,4% of the shares in Compass) is
to propose a scheme of arrangement in terms of section 311 of the Companies
Act between Compass and its shareholders (other than the consortium) ("the
scheme participants") in terms of which the consortium is to acquire all of
the shares held by the scheme participants. If the scheme is implemented,
scheme participants registered as such on the record date of the scheme will
receive 50 cents for every Compass share held by them ("the scheme
consideration").
Nedcor Bank Limited has confirmed to the Securities Regulation Panel that
the consortium has sufficient resources to satisfy its obligation to pay the
scheme consideration in the event that the scheme is implemented.
The board of directors of Compass has appointed Rand Merchant Bank ("RMB"),
a division of FirstRand Bank Limited, to advise the board as to whether the
scheme consideration is fair and reasonable to the scheme participants.
RMB's opinion will be included in the scheme circular to be posted to
shareholders.
Anglo American Corporation of South Africa Limited, which owns approximately
68% of the total issued share capital of Compass, has irrevocably undertaken
to vote in favour of the scheme, subject to RMB concluding that the scheme
consideration is fair and reasonable to the scheme participants.
4. The offer
Compass (or a subsidiary of Compass nominated by Compass) is to make an
offer to acquire the Compass debentures. The offer will be open for
acceptance by all Compass debenture holders. The amount payable to debenture
holders who accept the offer ("the offer consideration") shall comprise the
debenture holder's pro rata share of the consideration units (being
approximately 380 cents per debenture) and cash, the exact amount of which
can only be determined once the effective date accounts have been finalised.
The offer consideration will be payable in two tranches. The first tranche
will consist of the consideration units and a portion of cash. The second
tranche will consist of cash and will be dependant on, and payable after,
receipt of a VAT refund pursuant to the disposal.
Had the transaction been implemented on 31 December 2000 and assuming that
the VAT refund had been received at that date the amount payable to
debenture holders in terms of the offer would have been 404,89 cents per
debenture (valuing the consideration units at their aggregate issue price of
R10,00) or 452,42 cents per debenture (valuing the consideration units at
R11,25, being the market price of ApexHi linked units on 16 July 2001). Full
details relating to the calculation of the offer consideration will be
contained in the circular to be sent to Compass debenture holders.
The board of directors of Compass has appointed RMB to advise the board as
to whether the offer consideration is fair and reasonable to debenture
holders. RMB's opinion will be included in the offer circular to be posted
to debenture holders.
The consortium, which owns approximately 16,87% of the Compass debentures,
have undertaken not to accept the offer and Compass does not intend invoking
the provisions of section 440K of the Companies Act.
5. The restructure
The consortium, which will own the entire issued share capital of Compass
after the implementation of the scheme, wishes to use Compass as an
investment vehicle. In this regard it intends:
* delisting the ordinary shares;
* retaining the listing of the debentures;
* amending the debenture trust deed of the company to satisfy its
requirements.
The amendments to the debenture trust deed, which will require the consent
of debenture holders, will be detailed in the circular to be posted to
debenture holders.
6. Rationale for the transaction
The directors of Compass are of the view that its property portfolio is too
small to justify the current structure and that the current structure does
not benefit either shareholders or debenture holders as neither the Compass
shares or debentures are readily tradeable. Accordingly, the disposal
represents an opportunity for Compass to dispose of its property portfolio,
the value of which has been reduced by almost R60 000 000 since 31 December
1998, in return for the consideration units, which are to be issued at a
discount to their current market value, are forecast to yield approximately
21% and are likely to have a far greater liquidity than is currently enjoyed
by the Compass shares and debentures.
The scheme will result in Compass shareholders receiving 50 cents per share.
The balance sheet of Compass at 31 December 2000 reflects a deficit in
shareholders' funds of R36 881 000. In addition, no dividends have been
declared to shareholders since 1998 and only 30 430 shares traded in the six-
month period prior to the publication of the cautionary announcement.
The offer will allow those debenture holders who wish to sell their
debentures to acquire their pro rata portion of the consideration units
together with a portion of cash. Those debenture holders who choose not to
accept the offer will retain their debentures and will participate in the
restructured company going forward.
7. Conditions
The transaction is subject to the following conditions:
* the securing of all necessary consents from ApexHi linked unitholders to
the conclusion and implementation of the disposal;
* the securing of formal approval from the Listings Division of the JSE
Securities Exchange South Africa ("JSE") for listing of the consideration
units;
* the securing, to the extent necessary, of all approvals and consents for
the acquisitions required in terms of the Competition Act, 89 of 1998;
* the securing of all necessary approvals of Compass shareholders and
debenture holders to the conclusion and implementation of the disposal;
* the scheme being approved by 75% of the scheme participants present and
voting (either in person or by proxy) at the scheme meeting;
* the High Court of South Africa sanctioning the scheme; and
* a certified copy of the order of court sanctioning the scheme being
registered by the Registrar of Companies.
All of the above conditions must be fulfilled by no later than 1 October
2001, failing which the disposal, the scheme, the offer and the restructure
will be of no force or effect.
8. Financial effects of the transaction
The pro forma financial effects of the transaction on Compass shareholders
and debenture holders are illustrated below:
Financial effects for Compass shareholders Before After Change
(cents) (cents) (%)
Earnings/(loss) per share (before tax)1 (249) 5 102
Headline earnings/(loss) per share (before tax)1 29,86 5 (83,26)
Net asset value/(deficit) per share2 (419,10) 50 111,93
Market value on the close of trade on 29 May 2001,
being the day prior to the publication of the
cautionary announcement on SENS 100 50 (50)
Financial effects for Compass debenture holders Before After Change
who accept the offer (cents) (cents) (%)
Value per debenture with consideration units
valued at issue price3 350,00 404,89 15,68
Value per debenture with consideration units
valued at market price4 350,00 452,42 29,26
Income per debenture (before tax)5 78,74 80,42 2,13
Financial effects for Compass debenture holders Before After Change
who do not accept the offer (cents) (cents) (%)
Attributable value per debenture with
consideration units valued at issue price6 350,00 429,50 22,71
Attributable value per debenture with
consideration units valued at market price7 350,00 477,03 36,29
Income per debenture (before tax)8 78,74 77,63 (1,41)
Assumptions:
1. The earnings/(loss) and headline earnings/(loss) per share, as set out
in the "before" column, are based on the Compass audited financial results
for the year ended 31 December 2000. The earnings and headline earnings per
share, as set out in the "after" column, are based on the assumptions that
the transaction was implemented on 1 January 2000 and that the scheme
consideration was invested for the year at a pre-tax interest rate of 10%
p.a.
2. The net asset value/deficit per share, as set out in the "before"
column, is based on the Compass audited balance sheet at 31 December 2000.
The net asset value per share, as set out in the "after" column, is based on
the assumption that the transaction was implemented on 31 December 2000.
3. The value per debenture, as set out in the "before" column, is based on
the market value per debenture at the close of trade on 29 May 2001, being
the last trading day before publication of the cautionary announcement on
SENS. The value per debenture, as set out in the "after" column, is based on
the assumptions that the transaction was implemented on 31 December 2000,
that the offer is accepted and that the consideration units are valued at
the aggregate issue price of 1 000 cents.
4. The value per debenture, as set out in the "before" column, is based on
the market value per debenture at the close of trade on 29 May 2001, being
the last trading day before publication of the cautionary announcement on
SENS. The value per debenture, as set out in the "after" column, is based on
the assumptions that the transaction was implemented on 31 December 2000,
that the offer is accepted and that the consideration units are valued at
the aggregate market price at 16 July 2001 of 1 125 cents.
5. The interest per debenture, as set out in the "before" column, is based
on the Compass audited financial results for the year ended 31 December
2000. The interest per debenture, as set out in the "after" column, is
based on the assumptions that the transaction was implemented on 1 January
2000 and that the interest per debenture comprises the projected income from
the consideration units portion of the offer consideration together with
interest earned on the cash portion of the offer consideration invested for
the year at a pre-tax interest rate of 10% p.a.
6. The attributable value per debenture, as set out in the "before" column,
is based on the market value per debenture at the close of trade on 29 May
2001, being the last trading day before publication of the cautionary
announcement on SENS. The attributable value per debenture, as set out in
the "after" column, is based on the assumptions that the transaction was
implemented on 31 December 2000, that the offer is not accepted by any
debenture holders and that the consideration units are valued at the
aggregate issue price of 1 000 cents. The attributable value per debenture
is higher than the value for Compass debenture holders who accept the offer
as the attributable value includes cash remaining in the company.
7. The attributable value per debenture, as set out in the "before" column,
is based on the market value per debenture at the close of trade on 29 May
2001, being the last trading day before publication of the cautionary
announcement on SENS. The attributable value per debenture, as set out in
the "after" column, is based on the assumptions that the transaction was
implemented on 31 December 2000, that the offer is not accepted by any
debenture holders and that the consideration units are valued at the
aggregate market price at 16 July 2001 of 1 125 cents. The attributable
value per debenture is higher than the value for Compass debenture holders
who accept the offer as the attributable value includes cash remaining in
the company.
8. The interest per debenture, as set out in the "before" column, is based
on the Compass audited financial results for the year ended 31 December
2000. The interest per debenture, as set out in the "after" column, is based
on the assumptions that the transaction was implemented on 1 January 2000
and that the proceeds from the VAT refund would have been invested for the
year at a before-tax rate of 10% p.a. In addition, it has been assumed that
the debenture holders would have received an interest distribution of 90% of
the pre-tax income of Compass.
9. Salient times and dates of the transaction
2001
Court application to convene a meeting of shareholders
to consider the scheme on Monday, 20 August
Offer opens at 08:00 on Tuesday, 21 August
Last day to lodge forms of proxy for the
shareholders' meeting, by 10:00 on Tuesday, 11 September
Last day to lodge forms of proxy for the
debenture holders' meeting, by 10:00 on Tuesday, 11 September
Meeting of shareholders to consider the disposal and
the scheme at 10:00 on Thursday, 13 September
Meeting of debenture holders to consider the disposal
and the restructure at 10:30 on Thursday, 13 September
Application made to court for sanctioning
of the scheme on Monday, 24 September
Press announcement relating to the fulfilment of the
conditions to which the transaction is subject on Tuesday, 25 September
Suspension of the listing of Compass shares on the
JSE from the opening of business on Wednesday, 26 September
Record date to determine participation in the scheme
on Friday, 28 September
Termination of the listing of Compass shares on the JSE
from the close of business on Friday, 28 September
Offer closes at 17:00 on Friday, 28 September
Operative date of the scheme on Monday, 1 October
10. Interim distribution
An income distribution to Compass debenture holders in respect of the six-
month period ended 30 June 2001 will be made in the ordinary course. Further
details relating to the income distribution will be published together with
the publication of the interim financial statements of Compass.
11. Documentation
Circulars containing full details of:
* the disposal and the scheme will be posted to Compass shareholders;
* the disposal, the offer and the restructuring will be posted to Compass
debenture holders, at least 21 days before the shareholder and debenture
holder meetings.
23 July 2001
Corporate advisor and lead sponsor for Compass
Corpcapital Corporate Finance
Legal advisor
Corpcapital Transaction Support
Reporting accountants and auditors
PricewaterhouseCoopers Inc.
Chartered Accountants (SA)
Registered Accountants & Auditors
(Registration no. 1998/012055/21)
Independent advisor to Compass
Rand Merchant Bank
Corporate Finance
A Division of FirstRand Bank Limited
Joint sponsor
ENF Sponsors (Pty) Ltd
(Registration number 2000/027636/07)
