| Fri 17 Aug 2001, 0:00 | | Grayprop/agptm/grayvest - Merger Of Operations And |
|
ARRANGEMENT
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 and proposed schemes of arrangement
1. INTRODUCTION
It was announced in the press on 3 August 2001 that agreement had been
reached between Grayprop and Grayvest to merge their operations ("the
transaction"). Grayprop has proposed two indivisible schemes of arrangement,
namely a share scheme of arrangement ("the share scheme") and a debenture
scheme of arrangement ("the debenture scheme") (collectively, "the
schemes"), between Grayvest and its shareholders ("share scheme members")
and between Grayvest and its debenture holders ("debenture scheme members")
(collectively, "scheme members"), in terms of section 311 of the Companies
Act (No. 61 of 1973), as amended ("the Act").
The Grayvest shares and Grayvest debentures currently trade as indivisible
linked units ("Grayvest linked units" or "linked units") on the JSE
Securities Exchange South Africa ("JSE"). Grayprop currently does not own
any Grayvest linked units. Upon implementation of the schemes, Grayprop will
become the holder of all the Grayvest shares and Grayvest debentures and the
listing of Grayvest linked units on the JSE will be terminated.
2. TERMS OF THE SCHEMES
Subject to the fulfilment of the conditions precedent referred to below,
Grayprop will acquire all the Grayvest shares and Grayvest debentures in
return for which each Grayvest shareholder and Grayvest debenture holder
(collectively, "Grayvest linked unitholder" or "linked unitholder"),
registered as such at the close of business on the second Friday by which
the last of the conditions precedent is fulfilled ("schemes participant"),
will receive an aggregate consideration of 463 Grayprop units for every 100
Grayvest linked units held ("the schemes consideration"). This date is
expected to be Friday, 28 September 2001 ("the record date").
The number of Grayprop units to be created and issued as the schemes
consideration ("the Grayprop consideration units") is 260 981 613, which, at
an assumed issue price of 248 cents per Grayprop consideration unit, equates
to an aggregate consideration of R647 234 400.
3. CHANGE OF GRAYVEST YEAR-END AND DISTRIBUTIONS TO GRAYPROP UNITHOLDERS AND
GRAYVEST LINKED UNITHOLDERS
As announced in the press on 3 August 2001, the board of directors ("the
board") of Grayvest has 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 interest distribution in respect of the three-month
period ending 30 September 2001, to Grayvest linked unitholders registered
as such on 28 September 2001, the same date as the record date for the
schemes ("the Grayvest interest distribution"). The previous interest
distribution to Grayvest linked unitholders, declared but not yet paid, was
for the six-month period ended 30 June 2001.
Grayprop will make its next income distribution for the six-month period
ending 30 September 2001 to Grayprop unitholders registered as such on 28
September 2001, the same date as the record date for the schemes ("the
Grayprop income distribution"). The previous income distribution to Grayprop
unitholders, declared and paid, was for the six-month period ended 31 March
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 and interest distributions for the period from their last
interim reporting date to 30 September 2001.
The last day to trade, record date and payment date for the Grayprop income
distribution and the Grayvest interest distribution will be published on the
Stock Exchange News Service ("SENS") and in the press in due course.
4. FINANCIAL EFFECTS OF THE SCHEMES
4.1 Grayprop financial effects
The table below sets out the financial effects of the schemes on a Grayprop
unitholder.
Before After
per Grayprop per Grayprop
unit unit Change
(cents) (cents) (%)
Earnings(1) 14,9 14,9 0,0
Headline earnings(1) 14,9 14,9 0,0
Distribution(1) 15,0 15,0 0,0
Net asset value(2) 214,4 224,7 4,8
Net tangible asset value(2) 214,4 224,7 4,8
Revalued net asset value(3) 226,1 234,8 3,8
Number of units in issue
(O000)(4) 588 442 849 424 44,4
Weighted average number
of units (O000)(4) 588 442 849 424 44,4
Notes:
1. The earnings, headline earnings and distribution per Grayprop unit, as
set out in the "Before" column of the table, are based upon the unaudited
financial results of Grayprop for the six-month period ended 31 March 2001.
The earnings, headline earnings and distribution per Grayprop unit, as set
out in the "After" column of the table, are based upon the assumptions that
the schemes were effective on 1 October 2000 and that the Grayprop
consideration units were issued in full on that date. GrayvestOs unaudited
earnings, headline earnings and distribution for the six-month period ended
30 June 2001 have been used.
2. The net asset value and net tangible asset value per Grayprop unit, as
set out in the "Before" column of the table, are based upon the unaudited
balance sheet of Grayprop as at 31 March 2001. The net asset value and net
tangible asset value per Grayprop unit, as set out in the "After" column of
the table, have been based upon the unaudited balance sheet of Grayvest at
30 June 2001 and on the assumptions that the schemes were effective on 31
March 2001 and that the Grayprop consideration units were issued in full on
that date at an issue price of 248 cents per Grayprop consideration unit. A
provision for estimated costs of R5 million arising as a result of the
schemes has been raised, which will be capitalised to the cost of the
Grayvest linked units acquired by Grayprop.
3. The revalued net asset value per Grayprop unit, as set out in the
"Before" column of the table, is based upon the revalued property portfolio
of Grayprop as at 30 September 2001. The revalued net asset value per
Grayprop unit, as set out in the "After" column of the table, is based upon
the revalued property portfolio of Grayprop as at 30 September 2001 after
the implementation of the schemes. The valuation of the property portfolio
of Grayprop was prepared by an independent expert.
4. The number of Grayprop units, as set out in the "After" column of the
table, has been increased by 260 981 613 to reflect the issue of the
Grayprop consideration units.
4.2 Grayvest financial effects
The tables below set out the financial effects of the schemes on a Grayvest
linked unitholder.
Before After
per Grayvest per Grayvest
linked unit linked unit Change
(cents) (cents) (%)
Market value(1) 1 220 1 160 (4,9)
Market value(2) 1 054 1 103 4,6
Market value(3) 1 280 1 227 (4,1)
Market value(4) 1 215 1 241 2,1
Notes:
1. Based on the ruling market price of Grayvest linked units and Grayprop
units on Tuesday, 3 July 2001, being the trading day immediately preceding
the publication of the cautionary announcement.
2. Based on the trade-weighted average price of Grayvest linked units and
Grayprop units over the 180 trading days up to and including 3 July 2001.
3. Based on the ruling market price of Grayvest linked units and Grayprop
units on 3 August 2001, being the first trading day after the publication of
the terms announcement.
4. Based on the ruling market price of Grayvest linked units and Grayprop
units on 15 August 2001, being the last practicable date prior to the
finalisation of this announcement.
5. The market values detailed above, to some extent, include the anticipated
Grayprop income distribution and Grayvest interest distribution.
Before After
per Grayvest per Grayvest
linked unit linked unit Change
(cents) (cents) (%)
Earnings(1) 69,5 69,0 (0,7)
Headline earnings(1) 69,5 69,0 (0,7)
Distribution(1) 69,5 69,5 0,0
Net asset value(2) 1 148,2 1 040,5 (9,4)
Net tangible asset value(2) 1 148,2 1 040,5 (9,4)
Revalued net asset value(3) 1 185,9 1 086,9 (8,3)
Notes:
1. The earnings, headline earnings and distribution per Grayvest linked
unit, as set out in the "Before" column of the table, are based upon the
unaudited financial results of Grayvest for the six-month period ended 30
June 2001. The earnings, headline earnings and distribution per Grayvest
linked unit, as set out in the "After" column of the table, are based upon
the assumptions that the schemes were effective on 1 January 2001 and that
the Grayprop consideration units were issued in full on that date.
GraypropOs unaudited earnings, headline earnings and distribution for the
six-month period ended 31 March 2001 have been used.
2. The net asset value and net tangible asset value per Grayvest linked
unit, as set out in the "Before" column of the table, are based upon the
unaudited balance sheet of Grayvest as at 30 June 2001. The net asset value
and net tangible asset value per Grayvest linked unit, as set out in the
"After" column of the table, have been based upon the unaudited balance
sheet of Grayprop at 31 March 2001 and on the assumptions that the schemes
were effective on 30 June 2001 and that the Grayprop consideration units
were issued in full on that date at an issue price of 248 cents per Grayprop
consideration unit. A provision for estimated costs of R5 million arising as
a result of the schemes has been raised, which will be capitalised to the
cost of the Grayvest linked units acquired by Grayprop.
3. The revalued net asset value per Grayvest linked unit, as set out in the
"Before" column of the table, is based upon the revalued property portfolio
of Grayvest as at 30 September 2001. The revalued net asset value per
Grayvest linked unit, as set out in the "After" column of the table, is
based upon the revalued property portfolio of Grayprop as at 30 September
2001 after the implementation of the schemes. The valuation of the property
portfolios of both Grayvest and Grayprop were prepared by an independent
expert.
5. OPINIONS, RECOMMENDATIONS AND UNDERTAKINGS
The board of Grayvest has appointed Ernst & Young as the independent adviser
to advise them on whether the terms and conditions of the schemes are fair
and reasonable. After considering the terms and conditions of the schemes,
Ernst & Young has advised the board of Grayvest that it has considered the
terms and conditions of the schemes and is of the opinion that the schemes
consideration is fair and reasonable to scheme members.
J D Rainier, W J C Mitchell, M Herdman and S Shaw-Taylor are directors of
AGPTM and of Grayvest and are therefore not considered to be independent.
The board of Grayvest therefore appointed the only independent director, E
Osrin, who is not in any way deemed to be a related party to Grayprop, to
consider the terms of the schemes and make recommendations to the board of
Grayvest in this regard. E Osrin, the independent director, has considered
the terms of the schemes and is of the opinion that they are fair and
reasonable to scheme members and recommends that share scheme members and
debenture scheme members vote in favour of the respective schemes.
Furthermore, the other Grayvest directors, after considering the terms of
the schemes and the opinion of the independent director, are also of the
opinion that the terms of the schemes are fair and reasonable to scheme
members and recommend that scheme members vote in favour of the schemes.
Certain institutional scheme members, representing approximately 30,5% of
GrayvestOs issued share capital and issued debentures, have irrevocably
undertaken to vote in favour of the schemes in respect of the shares and
debentures that they hold or control. In addition, Allan Gray Limited, in
terms of its asset management mandates, will recommend to its clients who
are scheme members, holding approximately 32,7% of GrayvestOs issued share
capital and issued debentures, that they vote in favour of the schemes.
The board of AGPTM is of the opinion that the terms and conditions of the
transaction are fair and reasonable to Grayprop unitholders and that the
implementation of the transaction will be to the long-term benefit of
Grayprop unitholders. Accordingly, the board of AGPTM recommends that
Grayprop unitholders vote in favour of the ordinary resolutions to be
proposed at the general meeting necessary to give effect to the transaction.
Certain institutional and other significant Grayprop unitholders,
representing approximately 24,3% of GraypropOs issued units, have
irrevocably undertaken to vote in favour of the resolutions. In addition,
Allan Gray Limited, in terms of its asset management mandates, will
recommend to its clients who are Grayprop unitholders, holding approximately
15,8% of GraypropOs issued units, that they vote in favour of the
resolutions.
6. PROPOSED AMENDMENTS TO THE TRUST DEED OF GRAYPROP
The directors of AGPTM propose, subject to the requisite approval of
Grayprop unitholders by postal ballot, to amend the trust deed of Grayprop
("the trust deed") to:
- allow borrowings by the fixed property companies the shares of which are
held by Grayprop ("the Grayprop fixed property companies") not exceeding 30%
of the six-month weighted average of the market capitalisation on the JSE of
Grayprop during the six-month period preceding the date upon which the board
of AGPTM approves of the incurring of such borrowings;
- amend the relevant provisions of the trust deed dealing with encumbrances
so as to accord with the provisions of section 34(4) of the Unit Trusts
Control Act (No. 54 of 1981), as amended ("the UTC Act");
- change the basis of the service charge payable by Grayprop to AGPTM to
0,5% per annum of the market capitalisation on the JSE of Grayprop plus
borrowings, calculated and paid on a monthly basis;
- allow for the creation of new Grayprop units prior to the documents of
title in respect of Grayvest linked units being lodged with the trustee of
Grayprop under certain circumstances; and
- allow for the issue and allotment of unissued units in Grayprop to
discharge purchase considerations under certain circumstances.
6.1 Rationale for the trust deed amendments
Currently, the Grayprop fixed property companies have very limited borrowing
powers in terms of the trust deed. Grayprop has, however, received approval
from the Registrar of Unit Trust Companies ("the UTC Registrar") that the
Grayprop fixed property companies may incur borrowings not exceeding 30% of
the six-month weighted average of the market capitalisation on the JSE of
Grayprop during the six-month period preceding the date upon which the board
of AGPTM approves of the incurring of such borrowings. It is anticipated
that the UTC Act will be replaced in due course by the Collective
Investments Schemes Control Bill (2001), which is still to be promulgated,
and that the regulations to be issued thereunder will allow for such
borrowings. As at 30 June 2001, Grayvest had borrowings of R214,5 million.
The current service charge payable by Grayprop to AGPTM is calculated at
0,5% per annum of the market capitalisation on the JSE of Grayprop and takes
no cognisance of borrowings. As a consequence of the proposed increase in
the borrowing powers of the Grayprop fixed property companies, the current
basis for calculating the service charge of AGPTM, as provided for in the
trust deed, is no longer appropriate.
The administrative burden and management functions of AGPTM are dependent on
the size of the property portfolio of Grayprop (in other words the total
assets under the management of AGPTM). The property portfolio of Grayprop
may be financed either by way of unitholder funds or borrowings. Increased
borrowing powers of the Grayprop fixed property companies will in all
probability result in an increase in the size and value of the property
portfolio of Grayprop. AGPTM wishes to be remunerated in relation to the
total assets under its management and hence not be affected by the method of
financing the total assets of Grayprop.
AGPTM proposes however that, rather than calculating its service charge
simply as a fee on the total assets under its management, its service charge
be calculated on the market capitalisation on the JSE of Grayprop, plus the
aggregate amount of the borrowings of the Grayprop fixed property companies.
The rationale for this fee structure is that the service charge received by
AGPTM will then be related to the market capitalisation on the JSE of
Grayprop and hence provides an incentive to AGPTM to improve the market
rating of Grayprop and thereby ultimately benefit Grayprop unitholders.
However, as the market capitalisation on the JSE of a listed entity is a
reflection of the way the market rates or evaluates unitholder funds (that
is, total assets less borrowings), it is appropriate to add such borrowings
to the market capitalisation on the JSE of Grayprop for the purpose of
calculating the service charge of AGPTM. This is the fee structure currently
adopted by Grayvest.
The other amendments to the trust deed are considered procedural in nature
and are, inter alia, required to facilitate the implementation of the
schemes.
In terms of the trust deed, Grayprop is required to ballot unitholders by
post to make changes to the trust deed. A circular, incorporating the
necessary postal ballot and detailing the proposed changes to the trust
deed, was mailed to Grayprop unitholders on 10 August 2001.
7. CONDITIONS PRECEDENT
The implementation of the schemes is subject to the fulfilment of the
following conditions precedent (which are suspensive conditions):
- the cancellation of all encumbrances that Grayvest and/or any of its
subsidiaries may have over their assets;
- the termination of all suretyships or guarantees that Grayvest and/or any
of its subsidiaries may have given to discharge the liabilities of any other
person in the event of the failure of that person to do so;
- the changing of the Grayvest financial year-end to 30 September and
consequential alteration of the record dates and payment dates applicable to
the distribution of interest to Grayvest debenture holders;
- the securing of formal approval from the Listings Division of the JSE for
the listing of the Grayprop consideration units;
- the approval and implementation of all the proposed amendments to the
trust deed, as set out in paragraph 6 above;
- the approval by the UTC Registrar, the trustee of Grayprop and the
relevant competition authority in terms of the Competition Act (No. 89 of
1998), as amended, of the proposal by Grayprop of the schemes;
- the High Court of South Africa (Cape of Good Hope Provincial Division)
("the Court") granting an order convening the share scheme meeting and the
debenture scheme meeting (collectively, "the scheme meetings");
- the approval by Grayprop unitholders in a general meeting of the ordinary
resolutions necessary to give effect to the transaction;
- the share scheme having been approved by a majority representing three-
fourths (75%) of the votes exercisable by share scheme members present and
voting either in person or by proxy at the share scheme meeting;
- the debenture scheme having been approved by a majority in number of the
debenture scheme members present and voting in person or by proxy at the
debenture scheme meeting and representing three-fourths (75%) in value of
the debentures held by debenture scheme members present and voting either in
person or by proxy at the debenture scheme meeting;
- the Court having sanctioned the schemes; and
- a certified copy of the Order of Court sanctioning the schemes having been
registered by the Registrar of Companies in terms of the Act.
8. IMPORTANT DATES AND TIMES
The important dates and times pertaining to the transaction and the schemes
are set out in the table below.
2001
Last day to trade Grayvest linked units
on the JSE in order to be registered by
Friday, 7 September 2001 Friday, 31 August
(see note 1 below)
Last day to lodge forms of proxy for the
Grayprop general meeting by 09:00 on Thursday, 6 September
Last day to lodge forms of proxy for the
share scheme meeting by 11:00 on Thursday, 6 September
(see note 2 below)
Last day to lodge forms of proxy for the
debenture scheme meeting by 11:30 on Thursday, 6 September
(see note 2 below)
Record date in order to vote at the scheme
meetings by 16:00 on Friday, 7 September
Grayprop general meeting to be held
at 09:00 on Monday, 10 September
Share scheme meeting to be held at 11:00 on Monday, 10 September
Debenture scheme meeting to be held at
11:30 (or 15 minutes after the conclusion
of the meeting commencing at 11:00,
whichever is the later) on Monday, 10 September
Court hearing to sanction the schemes on Monday, 17 September
Press announcement regarding the results
of the Grayprop general meeting and the
scheme meetings on or about Wednesday, 19 September
If the schemes are sanctioned:
Expected last day to trade Grayvest linked
units on the JSE in order to be registered
on the record date Thursday, 20 September
Expected date of suspension of listing
of Grayvest linked units on the JSE at
the commencement of business on Friday, 21 September
Expected date of listing of Grayprop
consideration units on the JSE at the
commencement of business on Friday, 21 September
Expected record date to participate in
the schemes at 16:00 on Friday, 28 September
Expected operative date of the schemes on Sunday, 30 September
Expected date from which the schemes
consideration will be made available or
posted to schemes participants (if d
ocuments of title are received on or
prior to the record date) or, failing
that, within five business days of receipt
thereof by the transfer secretaries on Sunday, 30 September
Expected date of termination of listing
of Grayvest linked units on the JSE at
the commencement of business on Monday, 1 October
Notes:
1. Linked unitholders should note that, as Grayvest is now trading in the
STRATE environment, settlement for trade takes place five business days
after the last day to trade. Therefore linked unitholders who acquire
Grayvest linked units after the last day to trade will not be eligible to
vote at the scheme meetings.
2. If a form of proxy is not received by the date and time shown above, it
may be handed to the chairperson of the relevant scheme meeting by not later
than 10 minutes before the commencement of the relevant scheme meeting at
which it is intended that the form of proxy in question be used.
3. These dates and times may be changed by mutual agreement between Grayvest
and Grayprop. Any such change will be published on SENS and in the press.
4. Grayvest linked unitholders holding certificated linked units will be
unable to trade their Grayprop consideration units until they dematerialise
their Grayprop consideration units. Grayvest linked unitholders are
therefore urged to timeously dematerialise their Grayvest linked units such
that they may trade their Grayprop consideration units from Friday, 21
September 2001 onwards.
9. FURTHER DOCUMENTATION
A circular giving the details of the schemes and notifying Grayvest
debenture holders of the change of year-end to 30 September will be mailed
to Grayvest linked unitholders today.
A circular outlining the details of the transaction and containing a notice
of a general meeting of Grayprop unitholders will be mailed to Grayprop
unitholders today. This circular will also be mailed to Grayvest linked
unitholders for information purposes.
Cape Town
17 August 2001
