| Mon 3 Sep 2001, 0:00 | | Millennium Property: Restructuring Of The Company, |
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PROPOSALS"
MILLENNIUM PROPERTY HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
Share code: MIL ISIN code: ZAE000009056
(Registration number 1994/010083/06)
("Milprop" or "the company")
REGARDING:
* RESTRUCTURING OF THE COMPANY, INCORPORATING THE FOLLOWING PROPOSALS ("THE
PROPOSALS"):
- the ratification of the acquisition of an interest in Ikusasa
Communications Holdings Limited ("Ikusasa");
- the restructuring of Milprop's linked share and debenture capital;
- the amendment of Milprop's debenture trust deed;
- the specific repurchase of 9 194 605 Milprop shares ("the repurchase");
- the cancellation of 9 194 605 Milprop debentures;
- the disposal of a portion of Milprop's holding of linked units in Redefine
Income Fund Limited ("Redefine linked units") to repay long-term
liabilities;
- the distribution of Redefine linked units in specie to Milprop debenture
holders as a part redemption of Milprop's debenture capital (equivalent to
approximately 60,17 cents per Milprop debenture) and the payment of an
interest distribution of 4,25 cents per Milprop debenture ("the interest
distribution") and penalty interest on the interest distribution, amounting
in aggregate to approximately 65,06 cents per Milprop debenture ("the
distribution");
- the writing-down of the nominal value per Milprop debenture to 33 cents
per Milprop debenture;
- the amendment of Milprop's articles of association to change the main
business and main object of Milprop;
- the change of name to Millennium Information Technology Holdings Limited;
and
- the termination of Milprop's listing on the JSE Securities Exchange South
Africa ("the JSE");
* THE DIRECTORS' OFFER TO ACQUIRE MILPROP SHARES AT A PRICE OF 5 CENTS PER
MILPROP SHARE, AFTER THE APPROVAL OF THE PROPOSALS, INCLUDING THE DELINKING
OF MILPROP LINKED UNITS;
* DECLARATION OF THE INTEREST DISTRIBUTION; AND
* WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT.
1. INTRODUCTION
Upon its listing on the JSE on 15 June 1995, Milprop conducted the business
of a listed variable rate property loan stock holding company. On 31 January
2000, the company sold its property letting business, including the property
portfolio and certain subsidiaries. On 1 November 2000, the JSE suspended
the listing of Milprop after Milprop failed to acquire viable assets
conforming to the conditions for its continued listing and, consequently,
faces the threat of termination of its listing.
It was announced in the press on Tuesday, 28 November 2000 that in terms
of the proposed restructuring of the company, the reversal of Ikusasa into
Milprop would be reviewed. During the period between July 2000 and July 2001
certain transactions were concluded by Milprop and Millennium Properties
(Proprietary) Limited (a wholly-owned subsidiary of Milprop) ("Millennium
Properties"), which transactions would, if implemented, have resulted in
Milprop and Millennium Properties becoming the beneficial owners of 100% of
the issued share capital in Ikusasa.
After Milprop acquired 43,27% of the issued share capital of Ikusasa, a
substantial group of Milprop unitholders indicated to Milprop's board of
directors that they prefer a distribution of Milprop's Redefine linked units
following the settlement of all outstanding loan obligations. The directors
of Milprop ("the directors") consequently decided not to exercise the option
agreements to acquire the remaining 56,73% of Ikusasa before the separate
meeting of Milprop debenture holders ("the separate meeting") and the
general meeting of Milprop shareholders ("the general meeting") to be held
on Tuesday, 2 October 2001, but rather to extend those option agreements
until the proposals as set out below ("the proposals") have been
implemented.
In light of the above, the directors made a decision to unlock maximum
value for Milprop unitholders and recommend that the proposals be
implemented.
2. THE PROPOSALS
The objective of the proposals set out below is to distribute nearly all
Milprop's distributable assets to Milprop linked unitholders. The only
material assets remaining in Milprop after the implementation of these
proposals will be Milprop's investment in the issued share capital of
Ikusasa, the loan to Ikusasa and working capital amounting to approximately
R5,5 million. At the separate and general meetings, Milprop's debenture
holders and shareholders will be requested to approve the following
proposals:
2.1 The Yaxley acquisition agreement
Milprop unitholders will be requested to ratify the acquisition agreement
dated 22 November 2000, in terms of which Milprop acquired 34,27% of the
issued share capital of Ikusasa from the Yaxley consortium ("the Yaxley
acquisition agreement"). The purchase consideration in terms of this
agreement was a payment of an amount of R2,5 million in cash. In addition,
Millennium Properties incurred an obligation to make a further advance in
terms of the loan facility agreement between Millennium Properties and
Ikusasa of an amount of R600 000 in order to enable Ikusasa to pay Amethurst
Trust, an entity related to the vendors, for technical work to be completed.
The Yaxley acquisition agreement was implemented by the directors to secure
a settlement with the vendors in terms of which the vendors agreed to
relinquish ownership of and hand over a total of 9 194 605 Milprop linked
units in settlement of all claims against the aforesaid vendors ("the
settlement"). These Milprop linked units are held in trust by Millennium
Property Managers (Proprietary) Limited, a company controlled and owned by
the directors, pending an orderly disposal thereof on Milprop's behalf.
2.2 The amendment of the debenture trust deed
In order to achieve the objectives of, inter alia, the distribution of
Redefine linked units to Milprop debenture holders and the write-down in
terms of 2.8 below ("the write-down"), the board proposes that the Milprop
debenture trust deed be amended to permit that:
* each of the debentures governed by the Milprop debenture trust deed be
redeemable at the instance of the company at any time after the date of
issue of the debentures, in full or in part, in cash or in specie, or partly
in cash and partly in specie, or by the issue of new substitute debentures;
* the company be empowered to write-off against the debenture capital any
loss incurred on the disposal of any assets or any operating loss, subject
to the approval of Milprop debenture holders.
In addition, an acceleration clause will be inserted in the Milprop
debenture trust deed in terms of which the debentures will become redeemable
forthwith if the business of Ikusasa is disposed to a third party or if a
third party acquires equity in Ikusasa, in which case the debentures will be
redeemable in the same currency (scrip or cash) and the same proportion as
is received by Milprop, directly or indirectly.
2.3 The delinking of Milprop linked units
The directors propose that the linked units of the company, each comprising
one ordinary share in the share capital of the company which is linked to
one debenture in the capital of the company, be delinked to allow the
debentures to become freely transferable independently from the company's
ordinary shares and to allow the company to deal with the debentures as
envisaged.
2.4 Specific repurchase of 9 194 605 Milprop shares
Pursuant to the delinking of Milprop linked units, it is proposed that the 9
194 605 Milprop shares held in trust as referred to in 2.1 above be
repurchased at a price of 1 cent per Milprop share, being the nominal value
of Milprop shares.
2.5 Cancellation of 9 194 605 Milprop debentures
Following the delinking of Milprop linked units, it is proposed that the 9
194 605 Milprop debentures held in trust referred to in 2.1 above be
cancelled at a price of 76,5 cents per Milprop debenture, equivalent to the
preliminary audited net asset value per Milprop linked unit at 28 February
2001 less the nominal value of 1 cent attributable to each Milprop share.
2.6 Disposal of Redefine linked units to repay loan obligations
Authorisations will be sought from Milprop shareholders and Milprop
debenture holders to dispose of sufficient Redefine linked units through
Milprop's stockbrokers in the market within a period of four months after
the passing of the requisite resolutions at the separate and general
meetings to realise sufficient cash to enable Milprop to repay its
indebtedness to BoE Bank Limited ("the BoE loan"). The outstanding balance
of the BoE loan amounted to R12 673 021 at 28 February 2001.
2.7 Distribution of Redefine linked units
Subsequent to the repurchase, the delinking of Milprop linked units and the
repayment of the BoE loan, Milprop will be in a position to distribute
Redefine linked units, as requested by Milprop unitholders. The directors
propose that a portion of the Milprop debenture capital, equivalent to
approximately 60,17 cents per Milprop debenture, depending on the price
realised for the Redefine linked units sold in order to repay the BoE loan,
and the closing price of Redefine linked units at the relevant date, be
repaid in specie by the transfer to Milprop debenture holders of Redefine
linked units. The interest distribution, amounting to 4,25 cents per Milprop
debenture as proposed in the press on 7 June 2001, and penalty interest on
the interest distribution will also be paid as part of the distribution. The
total distribution of Redefine linked units in specie to Milprop debenture
holders consisting of the part redemption of Milprop's debenture capital,
the interest distribution and penalty interest on the interest distribution
will therefore be in the ratio of approximately 23,66 Redefine linked units
for every 100 Milprop debentures, equivalent to approximately 65,06 cents
per Milprop debenture, depending on the price realised for the Redefine
linked units in order to repay the BoE loan and the closing price of
Redefine linked units at the relevant date ("the distribution").
The directors propose that the balance of Redefine linked units, save for
Redefine linked units to the value of R6 313 000, be distributed net of
costs in respect of the distribution. The net effect will be the retention
of liquid assets to the value of approximately R5,5 million in Milprop. The
rationale for the retention of these liquid assets in Milprop is to provide
working capital to Milprop in order to ensure the continued existence of
Ikusasa with the ultimate goal of procuring the repayment of Milprop's
remaining debenture capital of R15 082 249 as a first charge against any
realisation receipts, as envisaged in 2.8 below.
2.8 The write-down
The value of Milprop debentures have been compromised by a series of events
and Milprop is unlikely to be in a position to redeem the Milprop debentures
at their redemption value of 249 cents per Milprop debenture. After the
cancellation referred to in 2.5 above and the distribution referred to in
2.7 above representing approximately 60,17 cents per Milprop debenture, it
is proposed that the remaining debenture capital be compromised and the
redemption value of 249 cents per Milprop debenture be reduced to a nominal
value of 33 cents per Milprop debenture.
The acceleration clause to be inserted in the trust deed, as referred to
in 2.2 above, will ensure that the remaining debenture capital of R15 082
249 is repaid to debenture holders upon the disposal or capitalisation of
Ikusasa.
2.9 Termination of JSE listing
The directors propose to Milprop shareholders and debenture holders that the
listing of Milprop's linked units be terminated. The rationale for the
proposed termination of listing is as follows:
* after implementation of the proposals, Milprop's only material asset will
be its investment in Ikusasa and, accordingly, it will not, based on Ikusasa
alone, qualify for continued listing on the JSE; and
* the directors consider the cost of maintaining Milprop's listing to exceed
the benefit to Milprop unitholders.
Subject to the passing of the resolutions proposed to be passed at the
separate and general meetings, the JSE has approved the termination of the
listing of Milprop's linked units with effect from a date to be announced in
the press in due course. The listing of Milprop's linked units has been
suspended since 1 November 2000 and will continue to be suspended until the
date of termination of listing.
2.10 Amendment to Milprop's memorandum of association to change the main
business and main object
In view of the investment in Ikusasa it is proposed that the main business
and main object of Milprop, as contained in the company's memorandum of
association, be altered to be that of an investment holding company in
respect of the information technology, telecommunications and property
(fixed and intellectual) industries.
2.11 Change of name
Milprop's name is no longer representative of the company's business, as is
evident from the Yaxley acquisition agreement. It is accordingly proposed
that the name of Milprop be changed to Millennium Information Technology
Holdings Limited. The name change will become effective from the date of
registration of the relevant special resolution by the Registrar of
Companies, which registration is expected to occur on or about Monday, 8
October 2001.
2.12 Financial effects of the proposals
The table below sets out the pro forma financial effects of the proposals on
the preliminary audited results of Milprop for the year ended 28 February
2001:
Notes Before (1) After (2) Change After (3) Change
(cents) (cents) (%) (cents) (%)
Income available
for distribution
per Milprop
linked unit 4, 6 5,3 5,3 - 2,7 (49,1)
Distribution per
Milprop linked unit 4,25 4,25 - 98,1 2 208,2
Net asset value per
Milprop linked unit 5, 6 77,5 77,5 - 17,7 (77,2)
Notes:
1. The unaudited pro forma income available for distribution per Milprop
linked unit, distribution per Milprop linked unit and net asset value per
Milprop linked unit as if the Yaxley acquisition agreement and the
settlement have not been implemented yet.
2. Extracted from the preliminary audited results of Milprop for the year
ended 28 February 2001. The income available for distribution per Milprop
linked unit, distribution per Milprop linked unit and net asset value per
Milprop linked unit as per the preliminary audited results, include the
effects of the Yaxley acquisition agreement and the settlement as these
transactions have been implemented by that date.
3. The pro forma financial effects on income available for distribution per
Milprop linked unit, distribution per Milprop linked unit and net asset
value per Milprop linked unit after the proposals and before the directors'
offer. The pro forma net asset value per linked unit after the proposals is
based on, inter alia, the following assets:
* Milprop's investment in Ikusasa at cost less the reduction in the
acquisition cost as a result of the specific repurchase of 9 194 605 Milprop
shares and the cancellation of 9 194 605 Milprop debentures; and
* Redefine linked units to the value of R6 313 000 that would not be
distributed. The net effect will be the retention of liquid assets to the
value of approximately R5,5 million in Milprop to provide working capital to
Milprop, in order to ensure the continued existence of Ikusasa with the
ultimate goal of firstly repaying Milprop's remaining debenture capital.
4. The effect on income available for distribution per Milprop unit was
calculated on the assumptions that:
* the proposals were effected on 1 March 2000;
* no interest was paid on the BoE loan;
* no income was received on the Redefine linked units.
5. The pro forma effect on net asset value per share was calculated on the
assumption that the proposals were effected on 28 February 2001.
6. The pro forma effect on income available for distribution per Milprop
linked unit, distribution per Milprop linked unit and net asset value per
Milprop linked unit was calculated on 45 703 786 issued Milprop shares and
45 703 786 issued Milprop debentures throughout the period.
The above pro forma financial effects are prepared for illustrative purposes
only and by virtue of their pro forma nature, may not give a true picture of
the financial position of Milprop.
3. THE DIRECTORS' OFFER
Subject to the implementation of the proposals, Messrs I S Schmidt, A B
Platt and Z J Sithole extend an offer to all Milprop shareholders to acquire
all or any part of their delinked Milprop shares at a price of 5 cents per
Milprop delinked share ("the directors' offer"). The directors thereafter
will aim to maximise value for the remaining Milprop shareholders by
attempting to either properly capitalise Ikusasa to make it a commercially
viable entity, or to dispose of Ikusasa. Any proceeds from the disposal of
Ikusasa will first be applied to the redemption of Milprop's remaining
debenture capital as stated in 2.7 above.
The directors' offer is conditional on the approval of the proposals at the
separate and general meetings.
Financial effects on Milprop shareholders who accept the directors' offer
The financial effects on a Milprop shareholder who elects to accept the
directors' offer are set out in the table below:
Suspension Shareholders
Shareholders
date who do not who
1 November accept the accept the
2000 directors' directors'
offer offer
(cents) (cents) (cents)
Upfront settlement
Interest distribution 4,25 - -
The distribution - 65,06 65,06
The directors' offer - - 5,00
Total upfront settlement 4,25 65,06 70,06
Deferred contingent settlement
Milprop debentures* 77,50 33,00 33,00
Net asset value per share - 17,67 -
Total deferred contingent settlement 77,50 50,67 33,00
Total upfront and deferred settlement 81,75 115,73 103,06
Market price 18,00 - -
Note: *Existing Milprop linked unitholders will retain their Milprop
debentures, even though the nominal value will have been written-down to 33
cents per Milprop debenture and even though Milprop will be an unlisted
public company after implementation of the proposals.
4. CIRCULAR TO SHAREHOLDERS AND DEBENTURE HOLDERS
Subject to the approvals of the JSE and Securities Regulation Panel, a
circular will be posted on or about Thursday, 6 September 2001 to Milprop
shareholders and Milprop debenture holders, which circular will contain,
inter alia, notices convening separate meetings of shareholders and
debenture holders to approve the proposals referred to above.
5. DECLARATION OF INTEREST DISTRIBUTION
Notice is hereby give that interest of 4,25 cents per Milprop debenture is
declared to Milprop debenture holders. It was announced in the press on 7
June 2001 that this interest distribution has been accrued. The interest
distribution will be paid in specie by the transfer of Redefine linked units
to Milprop debenture holders registered as such on Friday, 5 October 2001,
which interest payment will be distributed as part of the distribution
referred to in 2.7 above.
6. IMPORTANT DATES
The publication of the final distribution ratio, the date of the
distribution and the date of the termination of listing are dependent on the
date of the disposal of sufficient Redefine linked units to enable Milprop
to repay the BoE loan and these dates will be announced in the press after
such repayment.
7. WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
Milprop unitholders are advised that the cautionary announcement published
in the press on 7 June 2001 is hereby withdrawn.
Johannesburg
4 September 2001
Corporate advisor and sponsor
C&MA
Corporate and Merchant Advisors
(Registration number 1999/001129/06)
Reporting accountants
KPA Audit Group
Registered accountants and auditors
Attorneys
Le Roux Meyer Assenmacher Inc
(Registration number 1995/002001/21)
Independent advisor
Whistler Lambda Corporate Finance (Pty) Ltd.
Registration number 2000/025913/07
