| Mon 24 May 2004, 9:32 | | - TERMS ANNOUNCEMENT |
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PANGBOURNE PROPERTIES LIMITED - TERMS ANNOUNCEMENT
PANGBOURNE PROPERTIES LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1987/002352/06)
Share Code: PAP ISIN: 000005252
(`Pangbourne`)
DISPOSAL OF SUBSIDIARY
1. Introduction
Pangbourne combined unitholders are advised that agreement has been reached
between Pangbourne and iFour Properties Limited (`iFour`) whereby, subject to
the fulfillment of certain suspensive conditions as set out in paragraph 4
below, Pangbourne will dispose of its shares in and claims against Sipan 1
(Proprietary) Limited (`Sipan`), a wholly owned subsidiary, to iFour (`the
transaction`).
2. The rationale for the transaction
The recent low interest rate environment and renewed interest in the listed
property sector has resulted in a competitive environment for the acquisition of
high quality investment property. The ability to make acquisitions for cash
places an acquirer at a competitive advantage in this regard, both from a
pricing and a timing perspective.
iFour`s stated objective is to achieve growth in the size of its portfolio
without sacrificing the quality thereof, which, in turn, is expected to have a
positive influence on the rating and tradability of iFour linked units.
Pangbourne has a 44.81% interest in iFour, which interest forms a material
portion of Pangbourne`s asset base. In order to assist iFour in achieving its
objectives, Pangbourne has, over the last five months, made a series of cash
offers (which have been funded from existing bank facilities) to assemble a
portfolio of properties that has been evaluated by Pangbourne`s property
management team and meets iFour`s investment criteria (`the Sipan portfolio`).
Sipan has entered into agreements to acquire the properties comprising the
property portfolio. These agreements are now unconditional and transfer in
respect of these properties is underway or has been effected. Two of the
properties in the portfolio have been acquired from a single vendor, which
acquisition was the subject of an announcement contained in the commentary
attached to the recently-published interim results, whilst the remainder have
been acquired from individual, unrelated vendors.
3. Effective date
The effective date of the transaction is expected to be Monday, 28 June 2004.
4. Suspensive conditions to the transaction
The transaction is subject to the fulfillment of the following suspensive
conditions:
- the approval of the Competition Commission; and
- the approval of iFour shareholders in general meeting.
5. The consideration
Pangbourne will dispose of its interest in Sipan for a consideration of R287.75
million equal to the acquisition price of the Sipan portfolio plus all
associated costs (`the consideration`). The consideration includes a promoter`s
fee payable to Pangbourne of R2.76 million (`the promoters fee`).
In addition, Pangbourne will be paid a facilitation fee of R10.20 million (`the
facilitation fee`). The facilitation fee represents the appreciation in value of
the Sipan portfolio from the time of negotiating the acquisition thereof to the
effective date of the transaction, as well as compensation for Pangbourne`s role
as interim financier and temporary conduit in relation to the transaction.
The consideration will be discharged through the issue by iFour to Pangbourne of
a maximum of 16 458 008 iFour linked units (`the consideration linked units`) at
an issue price of R5.90 each and a cash payment in respect of the balance.
Pangbourne will not be entitled to any distribution declared by iFour for the
period commencing 1 January 2004 and ending 30 June 2004 in respect of the
consideration linked units. The facilitation fee will be settled in cash.
6. Pangbourne`s interest in iFour and the SRP ruling
In August 2003, Pangbourne entered into an agreement with iFour in terms of
which it disposed of a portfolio of properties in exchange for 49 911 200 new
iFour linked units. Pangbourne`s effective interest in iFour was approximately
49% (together with iFour linked units already held). This allowed Pangbourne to
diversify its risk profile through its increased interest in iFour. The issue by
iFour to Pangbourne of the maximum number of consideration units under the
disposal agreement will result in Pangbourne returning to this level after being
diluted on a temporary basis through the issue of new iFour linked units as
consideration for various property acquisitions. As set out in paragraph 7
below, the iFour linked units forming part of the consideration in addition to
the iFour linked units already held, will be retained. Pangbourne`s interest may
be reduced as iFour acquires further investment properties.
If Pangbourne is issued the maximum number of linked units under the disposal
agreement, Pangbourne`s interest in iFour will increase by 6.91.% from 44.81.%
currently held to 51.72%. This would, ordinarily, under Rule 8.1 of the
Securities Regulation Code on Takeovers and Mergers, trigger the requirement for
a mandatory offer to iFour`s other linked unitholders. However, having regard
for the net increase in Pangbourne`s interest in iFour and the brevity of the
period during which its effective interest in iFour remains below 45%, the SRP
has exercised its discretion under Rule 34 of the Code to dispense with
Pangbourne`s obligations under Rule 8.1 of the Code. This dispensation has been
granted on the condition that the disposal of Sipan becomes effective by
Tuesday, 10 August 2004.
7. Application of the proceeds
The cash proceeds from the transaction will be utilised to reduce the borrowings
incurred in the acquisition of the properties comprising the Sipan portfolio.
The iFour linked units forming part of the consideration will be retained for
the foreseeable future. iFour is expected to continue to partly fund the growth
in its portfolio through the issue of new linked units and therefore it is
likely that Pangbourne`s interest in iFour will be diluted to below 50% in the
medium-term.
8. Pro forma financial effects
The pro forma financial effects of the transaction have been prepared for
illustrative purposes only, to provide information about how the transaction
might have affected the financial information presented and, because of its
nature, may not give a true reflection of the financial position of Pangbourne.
The pro forma financial effects of the transaction on the earnings, headline
earnings, core earnings, net asset value and tangible net asset value per
Pangbourne combined unit are set out in the table below.
Before After
(cents per (cents per Change
combined unit) combined unit) %
Earnings 26.22(1) 34.76(2) 32.61
Headline earnings 17.09(1) 24.08(2) 40.83
Core earnings 42.56(1) 49.54(2) 16.40
Net asset value 556.69(3) 564.05(4) 1.32
Tangible net asset value 583.40(3) 591.94(4) 1.47
Notes:
(1) The earnings, headline earnings and core earnings per Pangbourne combined
unit, as set out in the `Before` column of the table, are based upon the
unaudited interim financial results of Pangbourne for the six months ended 31
December 2003 and 176 033 514 weighted average combined units in issue.
(2) The earnings, headline earnings and core earnings per Pangbourne combined
unit, as set out in the `After` column of the table, are based upon the
assumptions that:
- the acquisitions of the properties comprising the Sipan portfolio
were effective from 1 July 2003;
- the transaction was effective 1 July 2003;
- the maximum number of consideration linked units were issued on
1 July 2003;
- Pangbourne received the distribution of 37 cents per
consideration linked unit in respect of the period 1 July 2003 to
31 December 2003;
- Pangbourne paid the vendors of the Sipan properties in respect of
the acquisitions and received the consideration in respect of the
transaction on 1 July 2003;
- Pangbourne received the promoter`s fee and facilitation fee (`the
fees`) on 1 July 2003; and
- the fees received and the cash portion of the consideration were
applied against borrowings in respect of which interest at 9.5%
per annum is saved.
(3) The net asset value and tangible net asset value per Pangbourne combined
unit, as set out in the `Before` column of the table, are based upon the interim
balance sheet of Pangbourne at 31 December 2003.
(4) The net asset value and tangible net asset value per Pangbourne combined
unit, as set out in the `After` column of the table, are based upon the
assumptions that:
- the acquisitions of the properties comprising the Sipan portfolio
were effective from 31 December 2003;
- the transaction was effective 31 December 2003;
- Pangbourne paid the vendors of the Sipan properties in respect of
the acquisitions and received the consideration in respect of the
transaction on 31 December 2003; and
- Pangbourne received the fees on 31 December 2003.
9. Documentation
A circular containing the details of the transaction will be posted to combined
unitholders on or about Thursday, 10 June 2004.
10. Further cautionary announcement
Pangbourne combined unitholders are referred to the further cautionary
announcement dated Friday, 23 April 2004, and are advised that the discussions
referred to in that announcement are still underway. Pangbourne combined
unitholders are therefore advised to continue to exercise caution when trading
in their Pangbourne combined units until a further announcement is made in this
regard.
Johannesburg
24 May 2004
Merchant Bank and Corporate law advisers Auditors and
sponsor and consultants reporting accountants
SCMB ENF D&T
Date: 24/05/2004 08:02:10 AM Produced by the JSE SENS Department
