| Thu 13 Dec 2001, 0:00 | | Disposal By Iprop Of A Portion Of Its Investment P |
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Amended Announcement
IPROP HOLDINGS LIMITED
Incorporated in the Republic of South Africa
(Registration number 1968/001239/06
share code: IPR
ISIN code: ZAE 000018867
("iProp" or the "company")
DISPOSAL BY iPROP OF A PORTION OF ITS INVESTMENT PROPERTY PORTFOLIO
ÝAmended Announcement¨
1. Introduction
Mettle Limited is authorised to announce:
? the disposal by iProp of a portion of its property portfolio
including any businesses carried on in respect thereof to iFour S.A.
(Proprietary) Limited ("iFour S.A.") (save for three of such properties in
respect of which iProp and its subsidiaries' rights and obligations are to
be disposed of to iFour S.A. Two (Pty) Ltd ("iFour Two") ("investment
properties"), both wholly owned subsidiaries of iFour Properties
(Proprietary) Limited ("iFour") a company which it is proposed will be
converted to a public company and listed on the JSE Securities Exchange
South Africa ("the JSE") ("the disposal"); and
? the rationalisation of the iProp group of companies ("the
rationalisation") and the unbundling of a portion of linked units in iFour
(as referred to in paragraph 2) to shareholders ("the unbundling").
(collectively "the proposals").
The proposals are subject to the fulfilment of the conditions precedent set
out in paragraph 7 below.
2. The disposal
In terms of the disposal, iProp will dispose of the investment properties,
including the property portfolio owned by Onaghan Investments (No. 2) (Pty)
Ltd the entire issued share capital of which will be acquired by iProp
Limited, to iFour S.A. (and in respect of three of such properties the
rights and obligations of iProp and its subsidiaries to iFour Two) for a
total consideration of R246,3million, which consideration will be settled
through the issue of approximately 40,5 million linked units in iFour (one
linked unit comprising one ordinary share in iFour linked to one debenture)
and R43,9 million in cash. A portion of such linked units and cash proceeds
will be utilised to settle liabilities of the investment properties whilst a
further portion of such linked units will be distributed to iProp
shareholders as contemplated in paragraph 3 below. The disposal will become
effective on the date of transfer of the investment properties to iFour S.A.
and the settlement of the purchase price. The disposal is in terms of
section 228 of the Companies Act 61 of 1973 (as amended).
The linked units received will be of the same class and rank pari passu in
every respect with all the issued linked units of iFour. Full details of the
disposal will be contained in the circular to iProp shareholders to be
posted in due course.
3. The Unbundling and Rationalisation
Pursuant to the disposal, a portion of the iFour linked units received will
be distributed to iProp shareholders on the basis of 81 iFour units for
every 100 iProp shares held.
Should the unbundling of the iFour linked units be approved as an
"unbundling transaction" by the South African Revenue Service ("SARS") in
terms of section 60(2) of the Income Tax Act, No. 113 of 1993 ("the Act"),
the distribution by iProp to its ordinary shareholders of its investment in
the linked units in iFour will not constitute a dividend for the purposes of
secondary tax on companies, as envisaged by section 60(5)(a)(i) of the Act.
In addition, the registration of transfer of the ownership of the iFour
linked units into the names of iProp's ordinary shareholders will be exempt
from stamp duty in terms of section 60(3) of the Act.
Should the disposal of the investment properties be approved by SARS as a
scheme for the rationalisation of the iProp group of companies, according to
section 39 of the Taxation Laws Amendment Act, No. 20 of 1994 (as amended)
("the Amendment Act"), the transferor companies and iFour S.A. will be
deemed to be one and the same company for the purposes of normal income tax,
as envisaged by section 39(6)(c) of the Amendment Act. In addition, as part
of this scheme of rationalisation, the sale of the assets will not be
regarded as leviable transactions for the purposes of regional establishment
levies and section 103 of the Act will not be applied in respect of any
aspect of the rationalisation. As will be noted in paragraph 7.13 below,
the approval by SARS as contemplated above is a condition precedent of the
disposals, which is capable of being waived.
Furthermore, and in addition to the benefits of the rationalisation, it is
believed that that section 11 of the Value-Added Tax Act, 1991 will apply in
respect of the business undertakings sold as going concerns.
Full details of the unbundling and rationalisation will be contained in the
circular to iProp shareholders to be posted in due course.
4. iFour Properties (Proprietary) Limited
iFour is to be converted to a public company and listed on the JSE lists in
the Property Loan Stock sector. iFour has assembled a high quality property
portfolio with a value of approximately of R1 200 million. Full details of
iFour and iFour S.A. will be contained in the circular to iProp shareholders
and the iFour prospectus to be posted in due course.
5. Rationale
The iProp share has for some time been trading on the JSE at a substantial
discount to its net asset value per share. The directors have been exploring
various ways in which to release value in the company to its shareholders
and have concluded that the best return of value to shareholders is to
restructure the company as set out above. As a result of the proposals,
iProp will have been rationalised into a land development company, and the
investment properties will have been disposed of to wholly owned
subsidiaries of iFour, which company is focused specifically on investment
property holdings.
Shareholders will retain their interest in iProp and further, shareholders
will receive linked units in iFour, which they will receive through the
distribution described in paragraph 3 above.
6. Financial Effects
Set out below are the unaudited pro forma financial effects of iProp after
the proposals, which are provided for illustrative purposes only to show the
financial effect of the proposals on iProp. Shareholders are advised that
they will receive 81 iFour linked units for every 100 iProp shares held. The
iFour linked units will be issued at R5,00 per linked unit, the result of
which enhances the overall net asset value and net tangible asset value to
iProp shareholders.
Per iProp share Pro Forma Increase/ Pro Forma Increase/
Before the After the (Decrease) After the (Decrease)
proposals1 disposals proposals
(Cents) (Cents) (%) (Cents) (%)
Net asset value 1 127 1 3164 17% 9114 (19%)
Net tangible asset
value 1 108 1 2974 17% 8924 (19%)
Earnings
- Basic 107 2683 151% 2683 151%
- Fully diluted 992 2492,3 151% 2492,3 151%
Headline Earnings
- Basic 105 623 (41%) 623 (41%)
- Fully diluted 972 582,3 (40%) 582,3 (40%)
Notes:
1. Extracted from the published audited annual financial statements of iProp
at 30 September 2001.
2. For diluted earnings per share, net asset value and net tangible asset
value per share, the number of ordinary shares in issue is adjusted by 1 234
200 which assumes all share options granted to employees are exercised.
3. The effect on earnings and headline earnings per share are based on the
following assumptions:
* The proposals were effective 1 October 2000;
* The financing structures related to the investment properties were unwound
with effect 1 October 2000;
* Sufficient iFour linked units not distributed were sold at face value and
the proceeds were utilised to redeem all interest bearing liabilities
relating to the investment properties; and
* Earnings associated with the balance of linked units not distributed, have
not been included.
4. The effect on net asset and net tangible asset value per share is based
on the following assumptions:
* The proposals were effective 30 September 2001;
* The financing structures related to the investment properties were unwound
with effect 30 September 2001;
* Sufficient iFour linked units not distributed were sold at face value and
the proceeds were utilised to redeem all interest bearing liabilities
relating to the investment properties;
* For purposes of calculating pro forma net asset value and net tangible
asset value after the disposal, all linked units received as consideration
are carried at face value;
* For purposes of calculating pro forma net asset value and net tangible
asset value after the proposals, the balance of the linked units not
distributed are carried at face value;
* Shareholders in iProp receive 81 iFour linked units at an issue price of
R5,00 per linked unit for every 100 iProp shares held; and
* The distribution is based on the adjusted number of ordinary shares in
issue as set out in note 2 above.
7. Conditions Precedent
The proposals are subject to certain conditions precedent. At the date of
this terms announcement certain of the conditions precedent have already
been fulfilled and/or waived. The outstanding conditions precedent are:
7.1 the approval of all required regulatory bodies including the Competition
Commission;
7.2 the passing, by shareholders of iFour, of all resolutions as may be
necessary to establish iFour as a public company and as a property loan
stock company;
7.3 the JSE approving the listing of the linked units of iFour in the "Real
Estate - Property Loan Stock" sector of the JSE list;
7.4 agreements being concluded by iFour S.A. in respect of the purchase of
properties having a value of at least R700 million and those agreements
becoming unconditional and not being cancelled for any reason on or before
15 February 2002;
7.5 iFour procuring:
7.5.1 written commitments from investors to subscribe for linked units in
iFour of a prescribed minimum value; and
7.5.2 senior debt to provide funding to a prescribed minimum value to iFour
S.A.;
7.6 the board of directors of iFour S.A. resolving to confirm the
acquisition of the investment properties;
7.7 BOE Merchant Bank Limited, the Standard Bank of South Africa Limited and
Nedcor Investment Bank Limited, a division of Nedbank Limited, approving in
writing the disposal;
7.8 iProp Services (Proprietary) Ltd ("iProp Services"), on the one hand,
and iFour and/or iFour SA, on the other hand, concluding an agreement
regarding the transfer of certain members of iProp Services' staff to iFour
and/or iFour S.A.;
7.9 JHI Real Estate Limited ("JHI"), on the one hand, and iFour and iFour
S.A., on the other hand, concluding a management agreement in terms of which
JHI is to manage inter alia the investment properties on behalf of iFour;
7.10 iFour, JH Isaacs Group Holdings (Proprietary) Ltd ("JHI Holdings") and
iProp, concluding an agreement in respect of, inter alia, promoters' fees
payable to iProp and JHI Holdings in connection with the promotion and
establishment of iFour;
7.11 iProp providing its written approval to the memorandum and articles of
association of iFour and iFour S.A. as well as the debenture trust deed
executed in connection with the debentures which will comprise part of the
linked units referred to in paragraph 2 above;
7.12 employment contracts being concluded between iFour and JAA Diepenbroek
and JL Nunes;
7.13 the necessary approval from the Commissioner for SARS of the unbundling
and the rationalisation contemplated respectively in paragraph 3;
7.14 approval of the disposal by the Securities Regulation Panel ("the
SRP");
7.15 the proposals are subject to iProp shareholders approving same at the
general meeting referred to in paragraph 9 below, and any agreements, where
necessary and such agreements becoming unconditional in accordance with
their terms; and
7.16 the registration of any special resolutions, passed at the general
meeting referred to in paragraph 9 below, by the Registrar of Companies.
8. Opinions and Recommendations
The directors are of the opinion that the proposals are in the interests of
iProp shareholders and recommend that all iProp shareholders vote in favour
of the resolutions necessary to implement the transaction.
The directors of iProp who have direct and indirect interests in the issued
share capital of iProp, support the proposals and intend to vote in favour
of the resolutions required to implement the proposals.
9. Documentation and notices of general meeting
Circulars, which are subject to the approval of the JSE and the SRP, giving
details of the proposals and the listing particulars of iFour, and
containing a notice of a general meeting of the iProp shareholders are being
prepared and will be posted to iProp shareholders in due course. With the
consent of the JSE and SRP, this circular will be posted to shareholders
outside of the standard regulatory periods for a transaction of this nature.
Johannesburg
13 December 2001
Corporate Advisor
Mettle
Attorneys
Prinsloo, Tindle and Andropoulos
Sponsor
PricewaterhouseCoopers Corporate Finance (Pty) Ltd
Reporting A/C
PricewaterhouseCoopers Inc
