| Thu 20 Sep 2001, 0:00 | | Disposal By Richway Of Its Property Portfolio To P |
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RICHWAY RETAIL PROPERTIES LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1994/003602/06)
Share code:RHW ISIN code: ZAE000005906
("Richway" or "the company")
DISPOSAL BY RICHWAY OF ITS PROPERTY PORTFOLIO TO
PRIMEGRO PROPERTIES LIMITED ("PRIMEGRO")
1. Introduction
Vestacor Corporate Finance is authorised to announce that Richway has
entered into an agreement with Primegro in terms of which Richway has,
subject to certain conditions precedent outlined below, disposed of the
majority of its property portfolio constituting its business enterprise, to
Primegro for a net consideration of R1 107 million ("the disposal").
Richway linked unitholders are referred to the simultaneous announcement
by Primegro detailing its acquisition of the Richway portfolio.
2. The disposal properties
Richway has disposed of its investments in the following properties to
Primegro as a single indivisible transaction ("the disposal properties"):
Centre Richway's interest
prior to the disposal
Brooklyn Mall, Pretoria 100%
Walmer Park, Port Elizabeth 100%
Northgate Shopping Centre, Johannesburg 50%
Longbeach Mall, Cape Town 50,1%
Kolonnade Shopping Centre, Pretoria 50%
Barclay Square, Pretoria 100%
Pavilion, Pretoria 100%
Truchurch, Pretoria 100%
Brookfield, Pretoria 100%
As the holder of the remaining share in the Northgate and Kolonnade
shopping centres, Sasol Pension Fund ("SPF") has a pre-emptive right to
acquire Richway's share in these two centres on the same terms and
conditions as offered by Primegro. The Cape of Good Hope Bank ("CGHB") has a
similar pre-emptive right to Richway's share of Longbeach Mall. Both the
SPF and CGHB have given preliminary indications, subject to the approvals of
the relevant Committees within each organisation, that they do not intend to
exercise these pre-emptive rights.
3. The disposal consideration
The gross disposal consideration amounts to R1 175 million. The net disposal
consideration to be received by Richway, after costs of R68 million
attributable to Primegro amounts to R1 107 million. The net disposal
consideration is to be settled as follows:
* R952 million in cash on the transfer date ("the cash component"); and
* R155 million in Primegro deferred linked units on the transfer date ("the
linked unit component").
The linked unit component will be settled by Primegro issuing 23 134 328
Primegro deferred linked units to Richway at an issue price of 670 cents per
unit on 1 January 2002. Richway will not be permitted to dispose of these
linked units before 30 June 2002. The linked units will be issued on the
basis that they will not rank for the Primegro distribution to Primegro
linked unitholders for the six months ended 30 April 2002.
The disposal consideration can be increased or decreased by a maximum of
R25 million having regard to the outcome of a due-diligence investigation on
the forecast net income of the disposal properties.
The disposal consideration excludes any liabilities of Richway. A portion
of the disposal consideration will be utilised to eliminate the debt in
Richway.
4. Rationale for the disposal
The directors of Richway have widely publicised the fact that it has been
Richway's strategy to acquire A-grade regional and sub-regional shopping
centres and develop a dominant retail property fund of sufficient size and
tradability, which would ensure institutional investor support and unlock
value for linked unitholders. While considerable progress has been made
towards this goal, further progress was premised upon the ability to acquire
additional quality retail properties to increase the asset value of the fund
to around R2 billion, supported by capital funding from institutional
investors. A substantial part of the process was the acquisition of a
controlling stake in the Canal Walk Shopping Centre which did not
materialise.
In light of the above, the directors are of the opinion that it is in the
best interests of Richway linked unitholders to facilitate the development
of a substantial portfolio by injecting the Richway properties into
Primegro, thereby creating a vehicle which meets the aspirations of
investors while unlocking the discount to net asset value at which the
Richway linked units are currently trading.
5. Effective date
The effective date of the disposal will be 1 January 2002.
6. Conditions precedent
The disposal is subject to the following conditions precedent:
* approval by the JSE Securities Exchange South Africa ("JSE"), the
Competition Commission, the Securities Regulatory Panel ("SRP") and any
other applicable regulatory bodies;
* approval of the disposal by Richway linked unitholders in general meeting;
* approval by Primegro linked unitholders in general meeting; and
* the raising of the required borrowings by Primegro within 57 days of the
date of signature of the agreement. Primegro has indicated that it has
commitments in principle from its primary bankers to raise the required
funding.
7. Pro forma financial effects of the disposal
The table below sets out the pro forma financial effects of the disposal on
the earnings and net tangible asset value (Richway has no intangible assets)
per linked unit based on the audited results of Richway for the 12 months
ended 30 June 2001 and upon the following assumptions:
* the disposal was implemented on 1 July 2000 for the calculation of the
earnings per linked unit;
* the net cash proceeds from the disposal earned interest at a rate of 6,3%
after taxation (9% before taxation); and
* the disposal was implemented as at 30 June 2001 for the calculation of the
net tangible asset value.
Before After Change
(cents) (cents) %
Headline earnings per linked unit 48,04 39,66 (17,44)
Earnings per linked unit 62,42 162,48 160,30
Net tangible asset value per linked unit 539 631 17,07
No. of linked units in issue (000's) 65 302 65 302 -
8. Put and call option
In terms of the disposal agreement the parties have agreed reciprocal put
and call options ("the options") in terms of which:
* Richway is entitled to put R75 million of Primegro linked units to
Primegro at a 15% discount to the issue price of 670 cents, less an
additional amount calculated on a pro rata basis with reference to the date
of exercise of the put option on a sliding scale between R3 155 766 as at 1
January 2002 and R3 358 208 as at 30 June 2002; and
* Primegro has a call option to acquire R75 million of Primegro linked units
at a 15% premium to the issue price of 670 cents, less an additional amount
calculated on a pro rata basis with reference to the date of exercise of the
put option on a sliding scale between R3 155 766 as at 1 January 2002 and R3
358 208 as at 30 June 2002.
The options form part of the linked unit component of the disposal
consideration of R155 million and are exercisable from 1 January 2002 until
30 June 2002.
9. Circular to linked unitholders
A circular giving details of the disposal and incorporating a notice of
general meeting will, subject to the approval of the JSE and SRP, be sent to
Richway linked unitholders in due course.
10. Distribution of net proceeds realised
The directors of Richway are considering a number of alternatives to
distribute the net proceeds realised to Richway linked unitholders with a
view to the potential winding-up of Richway. Once the directors have agreed
to and finalised the mechanism of the winding-up and payment procedure, a
detailed announcement will be made to Richway linked unitholders advising
them of the proposals.
This distribution will not impact on the payment of the dividend and
debenture interest distributions to Richway linked unitholders for the six
month periods ended 30 June 2001 and 31 December 2001.
11. Withdrawal of cautionary announcements
Richway linked unitholders are advised that the cautionary announcements
dated 11 September 2001 and 31 July 2001 have been withdrawn.
Johannesburg
20 September 2001
Sponsor and independent adviser to Richway
Barnard Jacobs Mellet Corporate Finance
Corporate bank
BoE Corporate
Corporate adviser
Vestacor Corporate Finance
(A division of Vestacor Holdings (Pty) Ltd)
(Registration number 1997/022546/07)
Attorneys
FRRW
Fluxman Rabinowitz - Raphaely Weiner Inc. Attorneys
www.frrw.co.za
