| Fri 3 Aug 2001, 0:00 | | Grayprop / Agptm / Grayprop - Merger Of Operations |
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arrangement and further cautionary announcement
ALLAN GRAY PROPERTY TRUST
(A unit trust scheme in property shares registered
in terms of the Unit Trusts Control Act
(No. 54 of 1981), as amended)
("Grayprop")
managed by
ALLAN GRAY PROPERTY TRUST MANAGEMENT LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1983/003324/06)
("AGPTM")
ALLAN GRAY PROPERTY INVESTMENTS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1999/014347/06)
("Grayvest")
Merger of operations, proposed schemes of arrangement and further cautionary
announcement
1. Introduction
Further to the joint cautionary announcement published on Wednesday, 4 July
2001, Standard Corporate and Merchant Bank is authorised to announce that
agreement has been reached between Grayprop and Grayvest to merge their
operations ("the transaction"), which transaction is subject to the
fulfilment of certain suspensive conditions. Grayprop will propose two
indivisible schemes of arrangement ("the schemes") in terms of section 311
of the Companies Act (No. 61 of 1973), as amended ("the Act") between
Grayvest and its shareholders ("share scheme members") and between Grayvest
and its debenture holders ("debenture scheme members") (collectively,
"scheme members"), in terms of which Grayprop will become the holder of all
the Grayvest shares and Grayvest debentures for a consideration of 463
Grayprop units for every 100 Grayvest linked units held ("the schemes
consideration"). The Grayvest shares and Grayvest debentures currently trade
as indivisible linked units on the JSE Securities Exchange South Africa
("JSE"). Grayprop currently does not own any linked units in Grayvest. Upon
implementation of the schemes, the listing of Grayvest linked units on the
JSE will be terminated.
The directors of Grayvest have appointed Ernst & Young to advise them on
whether the terms and conditions of the schemes are fair and reasonable to
scheme members.
2. Rationale for the schemes
The directors of AGPTM and of Grayvest are of the view that the schemes
proposed by Grayprop will be beneficial to both Grayprop unitholders and
scheme members in light of the following considerations:
* the tradability of the Grayprop units is expected to improve due to the
larger market capitalisation of Grayprop, the increased number of Grayprop
units in issue and the enlarged pool of Grayprop unitholders. This will
especially benefit Grayvest linked unitholders as trade in their linked
units on the JSE is currently sporadic;
* in terms of the proposed Capital Gains Tax ("CGT") legislation, any
capital gain or loss by a Property Unit Trust ("PUT") will be disregarded
for CGT purposes. CGT will be applicable to unitholders on disposal of their
units. This is consistent with the existing income tax treatment afforded to
PUTS with income tax being payable by unitholders rather than by the PUT.
The CGT relief afforded to PUTS is not, however, extended to Property Loan
Stock ("PLS") companies and hence CGT may impact negatively on the
investments of linked unitholders in PLS companies;
* an entity with greater critical mass will be created, resulting in a
greater capability to raise capital for the acquisition of attractive
investment property, which will, in turn, broaden the base of potential new
investors;
* economies of scale will be exploited to the benefit of unitholders;
* after the implementation of the schemes, Grayprop's market capitalisation
is expected to exceed R2 billion, which will make Grayprop the largest
property investment entity listed on either the PUT or PLS sectors of the
JSE lists as measured by market capitalisation. This will enhance investors'
and sector analysts' awareness of Grayprop. Importantly, with the increase
in popularity of open ended property "fund of fund" unit trusts, Grayprop
having a market capitalisation in excess of R2 billion will enable these
unit trusts to invest up to 10% of their assets in the enlarged Grayprop.
Currently, these unit trusts may only invest up to 5% of their assets in
listed property entities with a market capitalisation of less than R2
billion. The enlarged size of Grayprop more than doubles the maximum
possible investment by these unit trusts to over R200 million from the
present limit of approximately R100 million and hence should create further
demand for Grayprop units; and
* Grayvest currently has less than 500 linked unitholders. In terms of
recent amendments to the JSE Listings Requirements, as from 1 January 2002,
Grayvest will need at least 500 public linked unitholders to maintain its
listing on the Main Board of the JSE. If the number of Grayvest linked
unitholders is not increased, Grayvest will no longer meet this requirement.
Grayprop already meets this requirement as the Grayprop units are widely
held.
In addition to the above, the directors of AGPTM and of Grayvest wish to
inform Grayprop unitholders and Grayvest linked unitholders that the schemes
consideration has been determined such that neither Grayprop unitholders nor
Grayvest linked unitholders would have had an increase or a decrease in
their interim distribution per unit or linked unit for the six-month periods
ended 31 March 2001 and 30 June 2001 respectively, assuming that the schemes
were effective on 1 October 2000 and 1 January 2001 respectively and that
the Grayprop units to be issued as the schemes consideration were issued in
full on those dates. In other words, the transaction is distribution-neutral
for Grayprop unitholders and Grayvest linked unitholders based on the last
published interim financial results of Grayprop and Grayvest.
3. Change of Grayvest financial year-end
The directors of Grayvest have decided to change the year-end of Grayvest
from 31 December to 30 September to bring it in line with that of Grayprop.
Grayvest will therefore make an income distribution in respect of the three-
month period ending 30 September 2001. The previous income distribution,
declared but not yet paid, was for the six-month period ended 30 June 2001.
The rationale for the above action is that Grayprop unitholders and Grayvest
linked unitholders will both receive, more or less simultaneously, their
respective income distributions for the period from their last interim
reporting date to 30 September 2001. The previous Grayprop income
distribution, declared and paid, was for the six-month period ended 31 March
2001. The above was taken into account by the directors of AGPTM and of
Grayvest in the determination of the schemes consideration.
4. SUSPENSIVE Conditions
The transaction is subject to the fulfilment of a number of suspensive
conditions, including, inter alia, the approval of the transaction by:
* the Registrar of Unit Trust Companies;
* the Grayprop trustee;
* the relevant competition authority in terms of the Competition Act (No. 89
of 1998), as amended;
* the requisite majorities of share scheme members and debenture scheme
members; and
* the requisite majority of Grayprop unitholders.
Further details of the suspensive conditions will be included in the next
announcement to Grayprop unitholders and Grayvest linked unitholders.
5. Further joint cautionary announcement
Grayprop unitholders and Grayvest linked unitholders are advised to continue
to exercise caution when dealing in their units or linked units, as the case
may be, until a further announcement is made.
Cape Town
2 August 2001
