| Thu 20 Sep 2001, 0:00 | | Primegro - Acquisition Of The Property Portfolio O |
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Properties by Primegro Properties
PRIMEGRO PROPERTIES LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1998/018436/06)
Share code:PMG ISIN code: ZAE000022620
("Primegro" or "the company")
Acquisition of the Property Portfolio
of Richway Retail Properties Limited ("Richway")
by Primegro Properties Limited ("Primegro")
1. Introduction
Nedcor Investment Bank is authorised to announce that Primegro has entered
into an agreement with Richway in terms of which Primegro will, subject to
the fulfilment of the conditions precedent referred to below, acquire the
property portfolio of Richway ("the Richway portfolio") for a net purchase
consideration of R1 107 million after the payment of R68 million costs
attributable to the transaction ("the Richway acquisition").
Primegro linked unitholders are referred to the simultaneous announcement
by Richway detailing its disposal of the Richway portfolio to Primegro ("the
Richway announcement").
2. The Richway acquisition
2.1 Details of the Richway portfolio and rationale for its acquisition
Core Properties % held by Richway and
purchased
by Primegro
Brooklyn Mall, Pretoria 100
Walmer Park Shopping Centre, Port Elizabeth 100
Northgate Shopping Centre, Johannesburg 50
Longbeach Shopping Centre, Cape Town 50,1*
Kolonnade Shopping Centre, Pretoria 50
* The 50,1% interest in the Longbeach Shopping Centre will either be
acquired as an undivided share in the property or as an interest in the
issued share capital of the property holding company.
As the holder of the remaining interest in the Northgate and Kolannade
shopping centres, Sasol Pension Fund ("SPF") has a pre-emptive right to
acquire Richway's interest in these two centres on the same terms and
conditions offered by Primegro. The Cape of Good Hope Bank ("CGHB") has a
similar pre-emptive right to Richway's interest in Longbeach Mall. Both 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.
As part of the transaction Primegro acquired four "non-core" properties,
constituting approximately 6% of the total price. It is intended to sell off
these non-core properties together with Primegro's other non-core properties
as stated below.
The directors of Primegro believe that the acquisition is likely to have
the following substantial benefits for Primegro:
- increased investor interest, improved market perceptions, improved
quality of income streams and a likely re-rating of the Primegro linked
units;
- an improvement in the tradability of Primegro linked units through the
larger market capitalisation and the broader spread of investors; and
- a critical mass that will facilitate the disposal of non-core properties
without materially affecting distributions.
The acquisition is in line with Primegro's strategy to grow the size and
quality of its portfolio, to improve the quality of its income stream and to
dispose of non-core properties.
2.2 Terms of the Richway acquisition
The vendors will receive a net amount of R1 107 million, after costs of R68
million attributable to Primegro, payable as to R952 million in cash and
R155 million in Primegro linked units.
Primegro's total purchase price of R1 175 million, including fees,
expenses and costs is to be settled as follows:
- Cash component R1 020 million
- Mortgage bond finance R764 million
- Placing and commitments on behalf of Richway R256 million
- Deferred linked units component R155 million
Subject to the outcome of a due diligence investigation, the purchase
consideration could vary by a maximum of R25 million upwards or downwards
depending on the final determination of the net income of the Richway
properties.
The effective date of the acquisition is 1 January 2002. The deferred
linked unit component of R155 million will be settled by Primegro's issue of
23 134 328 deferred linked units at an issue price of 670 cents on 1 January
2002. These deferred linked units retained by the vendors do not rank for
the distribution for the six months ending 30 April 2002.
The gearing of R764 million is to be provided equally by a consortium of
financial institutions, being Nedcor Investment Bank, ABSA Bank and BoE
Bank, subject to their due diligence exercise.
2.3 Put and call option
Primegro has granted Richway an option to put to Primegro R75 million of
linked units at a 15% discount on 670 cents per linked unit, less an
additional amount pro rated with reference to the date of the exercise of
the put option, on a sliding scale, between R3 155 766 and R3 358 208, to be
exercised by no later than 30 June 2002. Primegro has been granted an option
to call on Richway to deliver to Primegro R75 million of linked units at a
premium of 15% on 670 cents per linked unit, less an additional amount pro
rated with reference to the date of exercise of the call option, on a
sliding scale between R3 155 766 and R3 358 209 and to be exercised by no
later than 30 June 2002.
2.4 Placing of Primegro linked units on behalf of Richway
The Richway agreement requires Primegro to place approximately R256 million
of Primegro deferred linked units on behalf of Richway. Through a
combination of placings, commitments and gearing, the amount has been
secured. Full details regarding the deferred linked units to be issued and
placed will be disclosed in the circular to Primegro linked unitholders
referred to below.
2.5 Conditions precedent
The Richway acquisition is subject to the fulfilment of the following
conditions precedent:
- the approval of the JSE Securities Exchange South Africa ("JSE") and the
Securities Regulation Panel ("SRP");
- the approval of the Competition Commission;
- borrowings equal to but not less than 55% of the Richway portfolio,
growing to 65% over four years, plus a potential additional R75 million,
within 57 days of the date of signature of the Richway acquisition
agreement; and
- Richway and Primegro linked unitholders' approval within 60 days of the
successful completion of the due diligence.
3. Financial effects
In order to determine the financial effects of the acquisition and in
compliance with the requirements of the JSE, the published Primegro results
for the six months ended 30 April 2001 have been re-calculated, as if the
Richway acquisition had taken place with effect from 1 November 2000.
In determining the financial effects, the following assumptions have been
made:
- no ancillary benefits, which are expected to result from the Richway
acquisition, have been taken into account;
- the method of financing the properties was assumed to be the same as set
out in the agreements of sale and the terms of the bond finance obtained
were assumed to be the same as those that are expected to apply to the bonds
to be registered over the properties;
- the portion of the linked units issued to the vendors will not rank for
distribution for the six-month period after the effective date; and
- the rentals projected by the vendors for the six months from 1 January
2002, de-escalated by 9% p.a., have been used for the newly constructed
Longbeach property which was not yet trading in the six months to 30 April
2001.
Based on the aforesaid assumptions, the following would have been the
financial effects:
Before Richway After Richway %
Acquisition Acquisition Change
(cents) (cents)
Distribution per linked unit 43,0 42,8 (0,5)
Net asset value per linked unit 504 546 8,3
4. Opinion and recommendation
The directors of Primegro are of the opinion that the Richway acquisition
will be beneficial to Primegro linked unitholders and recommend that they
vote in favour thereof at the general meeting referred to below.
5. Circular to Primegro linked unitholders
A circular to Primegro linked unitholders, containing, inter alia, a notice
of general meeting, is being prepared and will, subject to the approval of
the JSE and SRP, be posted in due course.
Johannesburg
20 September 2001
Investment Bank and Sponsor
Nedcor Investment Bank
Lead Arranger
Nedcor Investment Bank
Attorneys
Jowell, Glyn & Marais Inc
(Registration number 1990/000849/21)
