| Fri 3 Sep 2004, 18:16 | | ACQUISITION OF A PROPERTY PORTFOLIO |
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DON - ACQUISITION OF A PROPERTY PORTFOLIO FROM ELLWAIN INVESTMENTS (PROPRIETARY)
LIMITED
THE DON GROUP LIMITED
(Registration number 1946/023123/06)
Incorporated in the Republic of South Africa
Share code: DON ISIN: ZAE000008462
(`Don` or `the company`)
ACQUISITION OF A PROPERTY PORTFOLIO FROM ELLWAIN INVESTMENTS (PROPRIETARY)
LIMITED (`ELLWAIN`)
1. Introduction
As announced on SENS on Thursday, 2 September 2004, in terms of an
agreement dated 26 September 2001 between the Don and Ellwain, which was
approved by Don shareholders in the general meeting held on 29 November
2001, Ellwain granted to Don an option, capable of exercise on or prior to
31 August 2004 (`the option`), to acquire a number of properties from
Ellwain described in paragraph 3 below (`properties`). These properties
are currently being leased as hotel properties by Don`s wholly owned
subsidiary Lennoxley Investment Holdings (Proprietary) Limited
(`Lennoxley`).
The aggregate purchase consideration for the properties is to be determined
at an initial amount of R41 million escalating at a compound rate of 1% per
month, calculated from 1 September 2001 until the payment date.
Don has ceded the option to its wholly owned subsidiary, Granport
Investments (Proprietary) Limited, which exercised same on Friday, 27
August 2004. (`the acquisition`).
The total purchase consideration, up to an amount of R57 525 000, will be
funded via a term facility provided by the Industrial Development
Corporation of South Africa Limited (`IDC`). The facility will bear
interest at a variable rate of 1,5% below the prime rate and is repayable
in 120 equal monthly instalments amounting to R760 200 per month at current
interest rates, commencing one month after the advance of the funds. The
loan agreement contains other provisions which are normal for a property
related loan transaction. The loan is not subject to any conditions, save
for the registration of mortgage bonds in a total amount of R57 525 000
over the properties.
The balance of the purchase price over and above the loan facility from the
IDC will be funded by Don and/or Lennoxley.
2. Rationale for the acquisition
The ownership of the properties ensures security of tenure.
Net asset value will be enhanced as the directors are of the opinion that
the current market value of the properties comfortably exceeds the
acquisition amount.
Whilst the loss per share does not change after the acquisition (refer to
paragraph 4 in this regard), the cash flow of the company will improve
since the depreciation on the properties of R1,2 million is a non cash flow
item.
3. Description of the properties being acquired
Suite Hotel Location Number
of
units
Don Beach Road Sea Point, Cape Town 27
Don Eastgate Bruma, Johannesburg 58
Don Rosebank Rosebank, Johannesburg 56
Don Arcadia I Arcadia, Pretoria 46
Don Arcadia II Arcadia, Pretoria 47
Don Sandton I Sandton, Johannesburg 24
Don Sandton III Sandton, Johannesburg 43
Don Sandton IV Sandton, Johannesburg 21
4. Pro forma financial effects of the acquisition
The pro forma financial effects of the acquisition on the audited financial
information of Don, as though the acquisition had been in effect for the
period under review, on earnings and headline earnings in respect of the
year ended 30 June 2004, and net asset value at 30 June 2004, the results
of which have been released simultaneously with the publication of this
announcement today, is set out below. The financial information has been
prepared for illustrative purposes only, and because of its nature may not
fairly present the company`s financial position and results of operation
after the acquisition.
Before After Change
(cents)(1 (cents) %
)
Loss per share (1,30) (1,30) -
Headline loss per share (1,14) (2) 14,0%
(1,00)
Net asset value per share 7,30 7,30 -
Net tangible asset value 7,30 7,30 -
per share
Weighted average number of 294 485 294 485 -
shares in issue
Closing number of shares 294 485 294 485 -
in issue
Notes
1. The amounts in the `Before` column have been extracted from the
audited financial results of Don for the year ended 30 June 2004, the
announcement of which appears elsewhere in this publication.
2. For the purposes of these pro forma financial effects, the value of
the properties has been determined to be R60 million, and accordingly
R2,475 million will be funded by Don and/or Lennoxley as the facility
provided by the IDC is restricted to R57,525 million.
3. Loss and headline loss per share have been calculated on the basis
that:
(a) the acquisition was effected on 1 July 2003;
(b) interest at a rate of 9,5% before and after taxation has been
provided on the IDC facility;
(c) rental paid of R7,2 million in respect of the properties has been
excluded;
(d) Depreciation at a rate of 2% per annum, amounting to R1,2
million, has been provided on the properties; and
(e) Interest has been foregone on the excess amount of R2,475 million
referred to in note 2 above, at 9% before and after taxation.
4. Net asset and net tangible asset value per share have been calculated
on the basis that:
(a) The acquisition was effected on 30 June 2004; and
(b) the properties were transferred at that date.
5. The acquisition of the properties pursuant to the exercise of the
option is not subject to any further conditions.
Paulshof
3 September 2004
Sponsor
Grant Thornton Corporate Finance (Proprietary) Limited
Attorneys
MJ King Inc
