| Thu 31 Jul 2003, 15:11 | | Terms announcement of iFour Properties Limited on |
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iFOUR PROPERTIES LIMITED
(Incorporated in the Republic of South Africa)
JSE code: IFR ISIN: ZAE000039236
(Registration number 2001/016118/06)
("iFour")
Terms announcement of iFour Properties Limited on the acquisition of various
properties and cautionary announcement
Introduction
PricewaterhouseCoopers Corporate Finance (Pty) Limited is authorised to announce
that, subject to the conditions precedent referred to in paragraph 4 below,
agreements have been concluded by iFour Properties Three (Proprietary) Limited
("the purchaser"), a wholly owned subsidiary of iFour, or its nominee, in terms
of which the purchaser has acquired various properties as set out in paragraph 3
below ("the acquisitions" or "the new portfolio").
Rationale of the acquisitions
Following the successful listing of iFour in June 2002, the board of directors
of iFour continued on a strategy to increase the asset base of the company by
acquisition with the intention of achieving a market capitalisation of more than
R2.0 billion to satisfy investor and market demand. The current market
conditions, interest rate environment and the satisfactory investment
performance of the property sector, create the ideal timing to acquire
additional investment quality properties thereby securing the long term
sustainability and quality of income streams from the overall iFour asset base.
The acquisitions will increase the overall asset base of iFour to over R1.446
billion, which will enhance the quality of the portfolio and improve the usage
spread. This, together with the economies of scale achievable in the long term,
will allow iFour to improve the current return on assets. The benefits of the
acquisitions are likely to be accentuated in a deflationary interest rate
environment.
Details of the acquisitions
The total purchase consideration for the acquisitions is R740.756 million,
R469.655 million to be settled in cash and the balance through the issue of 54
423 008 new iFour linked units ("the new iFour linked units") on date of
registration of transfer of the respective properties into the name of the
purchaser ("the transfer date"). The cash will be raised from ABSA Bank Limited
("ABSA") in terms of mortgage bond debt facilities to be provided to the
purchaser. The new iFour linked units not taken up by vendors will be placed
with institutional investors. Full details regarding the funding structure for
the acquisitions will be disclosed in the circular to iFour linked unit holders
referred to in paragraph 9 below.
The new portfolio comprises 53 properties acquired from a number of vendors.
The transactions are detailed below:-
Acquisitions from Improvon Group ("Improvon")
A portfolio of 14 commercial properties has been acquired from companies in the
Improvon Group for a purchase consideration of R179.113 million, to be settled
in cash. Substantial tenants of the properties acquired include Givauden,
Namitech and Siemens in Linbro Business Park and HiFi Corporation in Longmeadow.
Acquisitions from Pangbourne Properties Limited ("Pangbourne")("the Pangbourne
acquisition")
A portfolio of 25 commercial, office and retail properties has been acquired
from Pangbourne for a purchase consideration of 49 911 200 new iFour linked
units equating to an approximate aggregate consideration of R249.556 million.
The significant property assets by value in this portfolio include Eastside
Corporate Park, Longmeadow Toyota, Metal Box, 5 Wessels Road, North Ridge Road,
Investment Solutions and Shoprite Claremont.
As a consequence of the new iFour linked units being issued pursuant to the
Pangbourne acquisition, Pangbourne, which currently holds approximately 34,3% of
the iFour linked units currently in issue, will acquire control of iFour for the
purposes of the Securities Regulation Panel ("SRP") Code on Mergers and
Acquisitions. Accordingly, the acquisition will constitute an affected
transaction in terms of the SRP Code, which would normally oblige Pangbourne to
make a mandatory offer in terms of Rule 8 of the SRP Code to the other iFour
linked unit holders ("the mandatory offer").
However, the SRP has indicated that Pangbourne"s obligation to make the
mandatory offer will be suspended for a period of 12 months from the date on
which it would be obliged to make the mandatory offer ("the 12 month period") on
the basis that during the 12 month period:
Pangbourne"s iFour linked unit holding above 34,9% is "sterilised" and
Pangbourne will not be permitted to vote in respect of these sterilised linked
units; and
Pangbourne may not make acquisitions of linked units in the open market.
If Pangbourne"s interest in iFour is reduced to below 35% of the total issued
linked units in iFour within the 12 months period, the requirement to make the
mandatory offer will lapse. However, if Pangbourne"s interest is not reduced to
below 35%, Pangbourne will be required to make an offer to the other iFour
linked unit holders at the price at which it acquired the iFour linked units
based on the highest price at which any such iFour linked units were issued,
together with interest at the Government specified rate i.e. the official
prescribed rate, for the period that the Pangbourne linked unit holding in iFour
exceeded 35%. Such rate will be adjusted for any distributions made to iFour
linked unit holders in this period.
Pangbourne"s obligation to make the mandatory offer will fall away if, during
the 12 month period, a resolution is passed by the holders of an independent
majority of iFour linked unit holders waiving the requirement.
As Pangbourne is a related party in terms of the JSE Securities Exchange South
Africa Listings Requirements ("JSE"), Pangbourne"s votes will be taken into
account in determining a quorum at the general meeting of iFour linked unit
holders referred to in paragraph 9 below to be convened to approve the
acquisitions, but Pangbourne"s votes will not be taken into account in
determining the results at such meeting in relation to the resolution to approve
the Pangbourne acquisition.
Grand Central Square acquisition
A retail property namely Grand Central Square has been acquired from H.M.Saaks &
M.Allen for a purchase consideration of R48.5 million, to be discharged by the
issue of 1 858 238 new iFour linked units and R38.8 million in cash.
60 Electron Avenue Isando acquisition
A multi-tenanted industrial property has been acquired from the SLK Trust for a
purchase consideration of R54 million, to be settled in cash.
238 Corporate Landing acquisition
Corporate Landing Office Park has been acquired from Corporate Landing (Pty) Ltd
for a purchase consideration of R48.6 million, R43.7 million to be settled in
cash and the balance to be discharged by the issue of 931 034 new iFour linked
units.
Midrand Protea Hotel acquisition
Midrand Protea Hotel has been acquired from Clidet 433 (Pty) Ltd for a purchase
consideration of R40.6 million, to be settled in cash.
Cross Roads Kwamhlanga acquisition
Cross Roads Kwamhlanga, a retail property centre, 75% tenanted by national
tenants, has been acquired from McCormick Property Development CC t/a MPD
Crossroads, for a purchase consideration of R38.2 million, to be settled in
cash.
Turnberry and Muirfield acquisitions
The office buildings known as Turnberry and Muirfield in Fourways Golfpark have
been acquired from Renown Properties (Pty) Ltd for a purchase consideration of
R26.5 million to be settled in cash.
Other acquisitions
Various properties have been acquired from independent vendors for a total
purchase consideration of R55.7 million, R48.7 million to be settled in cash and
the balance to be discharged by the issue of 1 722 536 new iFour linked units.
Conditions precedent
The acquisitions are inter alia subject to the following conditions precedent,
namely:
4.1 iFour placing sufficient new iFour linked units with investors, to settle
the cash portions of the purchase prices and to dilute Pangbourne"s linked unit
holding in iFour on the implementation of the acquisitions to less than 50% of
the total issued linked units in iFour;
the approval of the various components of the acquisitions by the requisite
majorities of iFour shareholders and debenture holders in general meeting;
the approval of the Pangbourne acquisition by the requisite majorities of
Pangbourne shareholders and debenture holders in general meeting;
the granting of all requisite regulatory approvals, including Competition
Commission approval to the Pangbourne acquisition and the acquisition of certain
of the other properties; and
the approval of the JSE to the listing of new iFour linked units.
Acquisition of the rights to 6 300 000 deferred iFour linked units
An in principle agreement has been reached in terms of which iFour will acquire
from iProp Holdings Limited and Lerix Investments (Proprietary) Limited, the
rights to be issued 6 300 000 iFour linked units on 15 March 2004, fully paid up
at R5 for an aggregate consideration of R27.09 million. A further announcement
will be made as soon as the detailed terms of the transaction have been
finalised.
Transaction costs and promoter"s fee
Transaction costs amounting to approximately R20.5 million will be paid in cash,
which includes promoters" fees of approximately R8.9 million, which fees are to
be paid to Mettle Limited and Pangbourne after the transfer date.
Property management agreements
Following the listing of iFour, the day-to-day responsibility for property
management was contracted to JHI Real Estate (Proprietary) Limited ("JHI") and
Gensec Property Services ("Gensec"). JH Isaacs Group Holdings (Proprietary)
Limited ("JHI Holdings") also has certain rights as co-promoter of iFour.
Pangbourne has conditionally acquired JHI"s rights and obligations in respect of
the property management, and JHI Holdings has waived its residual promoter"s
rights. After implementation of the agreement with JHI and JHI Holdings and the
acquisitions, the property management of the enlarged iFour property portfolio
will be performed by Pangbourne on terms and conditions similar to those
contained in the JHI and Gensec property management agreements.
Financial effects
The table below sets out the pro forma financial effects of the transaction on
the headline earnings and net asset value per iFour linked unit based on the
published iFour results for the year ended 30 June 2003 and the assumptions and
adjustments set out below.
Before After Change
121.0 76.1 -37.1%
Basic earnings per linked unit
(cents)
Headline earnings per linked unit 76.9 56.0 -27.2%
(cents)
Diluted headline earnings per 69.1 53.3 -22.9%
linked unit (cents)
Net asset value per linked unit 523.0 505.3 -3.4%
(cents)
Linked units in issue 58,275,179 124,754,723
Weighted average linked units in 58,275,179 108,134,837
issue
Assumptions and adjustments:
In relation to the pro forma earnings and headline earnings per linked unit, the
acquisition had been implemented on 1 July 2002 and the vendor consideration
linked units were issued on 1 July 2002;
99.9% of the acquired profit before taxation is distributed to iFour linked unit
holders;
An average interest rate of 11% before taxation was paid on the debt used to
finance the cash consideration; and
The net asset value is adjusted to reflect the effect had the acquisitions been
effected on 30 June 2003.
The pro forma financial information does not reflect trading results of all the
properties within the new portfolio as certain properties were under
construction and others were owner occupied during the period. iFour forecasts a
distribution of 75 cents per linked unit for the year ended 30 June 2004, which
is equivalent to the total distribution per linked unit for the 12 months ended
30 June 2003.
Documentation and notice of general meeting
A circular incorporating revised listings particulars for iFour, giving details
of the acquisitions and containing notices of a general meeting of the iFour
shareholders and debenture holders will be posted to iFour linked unit holders
in due course.
Cautionary
Further to this announcement, linked unit holders are advised to continue to
exercise caution when dealing in their iFour linked units until such time as a
further announcement is made.
Johannesburg
31 July 2003
Sponsor
PricewaterhouseCoopers Corporate Finance (Pty) Ltd
(Registration number 1970/003711/07)
Corporate Legal Advisers and Consultants
Edward Nathan & Friedland (Proprietary) Limited
(Registration number 1999/026464/07)
Corporate Advisor
Mettle Limited
(Registration number 1996/010795/06)
Attorneys
Knowles Husain Lindsay Inc
(Registration number 2000/000004/21)
Date: 31/07/2003 01:09:54 PM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department
