| Thu 16 Oct 2003, 17:50 | | FAIRVEST - DETAILED CAUTIONARY ANNOUNCEMENT RELATI |
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FAIRVEST - DETAILED CAUTIONARY ANNOUNCEMENT RELATING TO THE ISPOSAL OF
FAIRVEST"S ENTIRE PROPERTY PORTFOLIO AND ASSETS
Fairvest Property Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration No. 1998/005011/06)
("Fairvest")
Share code: FVT ISIN: ZAE000034658
Detailed Cautionary Announcement relating to the isposal of Fairvest"s entire
property portfolio and assets
Introduction
Linked unit holders are referred to a renewal of cautionary announcement on 4
September 2003 and to the announcement on 14 July 2003 of Fairvest"s reviewed
financial results for the six months ended 31 March 2003 in which linked unit
holders were informed of the impending disposal of the company"s entire property
portfolio.
Disposal of the entire property portfolio
Imara Corporate Finance South Africa (Pty) Limited is authorised to announce
that an agreement (inclusive of the normal warranties) has been signed between
Fairvest and Daisy Street Investments 127 (Proprietary) Limited ("Daisy Street")
in terms of which Daisy Street has acquired, with effect from 1 September 2003,
the entire issued share capital and shareholders" loan account of Fairvest
Property (Proprietary) Limited ("Fairprop"), a wholly owned subsidiary of
Fairvest for a net purchase consideration of R136 306 111 ("the Daisy Street
disposal").
The gross purchase consideration is R289 530 000 less the aggregate amount of
all mortgage bonds and financing facilities of R153 223 889 outstanding against
the properties.
Daisy Street, is in turn, being onsold to Alpina Investments Limited (formerly
Gold Edge Holdings Limited) ("Alpina"), a company listed in the "Financial: Real
Estate" sector of the JSE Securities Exchange South Africa ("the JSE").
Settlement of the purchase consideration
The purchase price of R136 306 111 in respect of the Daisy Street disposal will
be settled by Alpina through the issue of 68 153 056 "b-class" linked units of
200 cents each to Daisy Street who will renouncethe linked units to Fairvest.
Each "b-class" linked unit in Alpina will comprise one ordinary share of 1 cent
and one debenture of 1 cent each issued at a premium of 198 cents. The "b-class"
linked units in Alpina will rank pari passu with all other Alpina "b-class"
linked units in issue.
Fairvest will, as soon as practically possible, distribute the Alpina "b-class
linked units to its linked unit holders in the ratio of 58,8 Alpina "b-class"
linked units for every 100 Fairvest linked units held on the effective date of
the Daisy Street disposal.
Linked unit structure
Alpina has a capital structure comprising of linked units with the following
summarised terms and conditions:
"a-class" linked units: consist of one ordinary share with a par value of 1 cent
linked to an "a-class" debenture at a par value of 1 cent each and a premium of
198 cents; for the first twelve months after issue, these debentures will earn
interest at a nominal rate of 14% pa payable six monthly in arrear provided that
sufficient profits are available, and thereafter payable on a variable basis
after full provision has been made for the payment of interest to the "b-class"
debenture holders; and
"b-class" linked units: consist of one ordinary share with a par value of 1 cent
linked to a "b-class" debenture at a par value of 1 cent each and a premium of
198 cents; for the first twelve months after issue, these debentures will earn
interest at a variable rate after full provision has been made for the payment
of the initial 14% to the "a-class" debenture holders, and after such twelve
month period interest will escalate from a base of 14% pa by 5% every six months
on a compounded basis every six months with such debenture holders participating
in the available interest up to their appropriate rate of interest before
payments are made to "a-class" debenture holders.
Rationale for the Daisy Street disposal
As the underlying value of Fairvest linked units has not been reflected in the
share price due to a combination of high historic interest rates, an inadequate
return from certain properties, its capital structure and a high gearing ratio,
the directors have decided to dispose of the entire property portfolio to Alpina
in order to achieve a sustainable income yield and to unlock maximum value for
linked unit holders.
Additional transactions undertaken by Alpina
In addition to the Daisy Street disposal referred to above, Daisy Street has
simultaneously acquired a further portfolio of commercial properties and
property related businesses in property management, property finance and
mortgage origination ("second portfolio") from various vendors for a total net
purchase price of R114 828 040. The second portfolio comprises a gross value of
properties and businesses to be acquired of R106 600 000, with mortgage bonds
and liabilities of R23 800 000 being assumed. The purchase price for the second
portfolio will be settled by the issue of 57,414,020 Alpina "b-class" linked
units at 200 cents per linked unit to Daisy Street who will renounce such
linked units to the respective vendors of the second portfolio.
Prior to this announcement, at a general meeting held on 6 August 2003, Alpina"s
shareholders approved the acquisition of a R93 004 000 property portfolio owned
by Ixia Trading 532 (Proprietary) Limited ("the Ixia transaction"). The purchase
consideration for the Ixia transaction is to be settled by the issue of "b-
class" linked units and the assumption of debt. This portfolio was onsold from
Bonatla Property Holdings Limited ("Bonatla"). The properties in this portfolio
are in the process of being transferred to Alpina. The property transfers have
been delayed as a result of the municipal authorities being unable to timeously
furnish the necessary clearance certificates required to effect the Deeds Office
transfers. Once the transfers have been completed, Alpina will in respect of the
Ixia transaction, issue 11 662 607 "b-class" linked units at 200 cents per
linked unit for renunciation to Bonatla.
Net effect of the Daisy Street disposal
Following the Daisy Street disposal and the Ixia transaction referred to above,
Alpina will hold property and related assets to the value of R573,5 million,
against which R290,7 million will be financed by mortgage bonds. Alpina will
therefore have a gearing ratio of 50,7% to assets.
Daisy Street will receive and renounce a total of 125 567 076 "b-class" linked
units (85,8%) out of the 146 346 609 Alpina linked units in issue. Fairvest
linked unit holders will collectively hold 46,6% of Alpina"s linked units, i.e.
68 153 056 "b-class" linked units of 200 cents each.
The Fairvest board has undertaken to renounce its entitlement to the 68 153 056
"b-class" Alpina linked units to its linked unit holders within three months of
the conclusion of the Daisy Street disposal. An application will be made to the
Securities Regulation Panel ("SRP") for dispensation to waive making a mandatory
offer to Alpina"s linked unit holders in view of the impending renunciation of
the Alpina linked units.
No individual shareholder will hold more than 17,5% of Alpina"s total issued
linked units.
Financial Effects
The full financial effects of the disposal of the entire property portfolio of
Fairvest on a Fairvest linked unit holder will be announced once the relevant
historic accounting information pertaining to the various companies holding
properties and businesses being purchased by Alpina has been evaluated.
Fairvest linked unit holders will however receive 58,8 Alpina linked units of
200 cents each in return for their present holdings of 100 Fairvest linked
units. The Fairvest linked units are accordingly valued at 117,6 cents each.
Since 1 August 2003, Fairvest linked units have traded at a weighted average
price of 43 cents.
Conditions Precedent
The Daisy Street disposal is subject to the following terms and conditions:
* The approval of the disposal of Fairprop in exchange for 68 153 056 "b-class"
linked units of 200 cents each in Alpina by linked unit holders of Fairvest in
general meeting;
* The approval of the acquisition of Daisy Street by the shareholders of Alpina
in general meeting;
* The granting of the listing of the Alpina "b-class" linked units by the JSE;
* The approval of the SRP, the JSE and the Competition Commission to the Daisy
Street acquisition.
Circular to shareholders
Full details of the Daisy Street disposal will be contained in a circular to
shareholders of Fairvest, which will be posted within the next 28 days. In terms
of the JSE"s Listings Requirements with regard to related parties, certain
shareholders may not be permitted to participate in the vote for the approval of
the Daisy Street disposal.
Fairvest"s continued status as a listed entity
As a result of the Daisy Street disposal and the impending renunciation of the
Alpina "b-class" linked units to Fairvest linked unit holders, Fairvest will no
longer qualify to retain its listing on the JSE. The directors of Fairvest have
accordingly already commenced discussions to transform Fairvest into a BEE
property trading and development business. Fairvest will therefore need to apply
to the JSE to retain its listing based on it having acquired suitable assets.
Further cautionary announcement
Shareholders of Fairvest are advised to exercise caution in the trading of their
shares until such time as they are informed of:
- the financial effects of the Daisy Street disposal;
- progress as to the acquisition of additional assets by Fairvest; and
- the continued listing status of Fairvest
16 October 2003
Sponsor and Corporate Finance Advisor
Imara Corporate Finance South Africa (Pty) Limited
