| Thu 9 Mar 2006, 14:19 | | Acc-Ross Holdings Limited - Combined acquisitions |
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ACC
ACC
Acc-Ross Holdings Limited - Combined acquisitions
Acc-Ross Holdings Limited
(Formerly Le-Sel Holdings Limited)
(Incorporated in the Republic of South Africa)
(Registration number 2000/000059/06)
("the company" or "Acc-Ross")
ISIN Code: ZAE000077335 Share code: ACC
COMBINED ACQUISITIONS AND SALE OF ASSETS AND EMPOWERMENT TRANSACTION WITH THE
ABALENGANI GROUP OF COMPANIES (TOGETHER "THE TRANSACTION"), WITHDRAWAL OF
CAUTIONARY AND TRADING STATEMENT
Introduction
The board of directors is pleased to announce, in accordance with the company"s
stated objective of achieving an empowered status, the conclusion of a
significant empowerment transaction effective 28 February 2006, with the
Abalengani Group of Companies ("Abalengani" or "the vendor"), that provides for
both an empowerment transaction and a strategic partnership with Abalengani
going forward. Abalengani owns various upmarket property development assets,
which will be purchased by Acc-Ross for a purchase price of R210 803 000 and
Acc-Ross has sold certain assets to Abalengani. In addition, this transaction
has enabled Acc-Ross to secure the balance of the projects that Acc-Ross would
not have been able to acquire due to the fact that full subscription was not
achieved at date of listing. Abalengani is also adding value by assisting in
securing project finance for the company through the provision of suretyships on
developments of up to R250 million, where necessary. Abalengani, controlled
indirectly by the Moti family, will hold 10.04% in Acc-Ross and is an important
value adding, empowerment partner for the company in the achievement of its
strategic objectives and goals going forward.
Combined acquisitions and sale of assets
Acc-Ross, through its 100% subsidiary Gardener Ross Holdings Limited ("GRH"),
acquired 100% of Zamien Investments 66 (Proprietary) Limited, which holds a
project currently known as The Bay for a purchase consideration of R144 803 000
from Abalengani. The purchase consideration will be settled by way the issue of
78 000 000 new shares in Acc-Ross at an issue price of 86.7 cents per share,
being the weighted average share price of the company from date of listing to 28
February 2006 (the weighted average share price") totalling R67 626 000, the
transfer to Abalengani of 20 stands held by GRH for R30 million, cash of R30 177
000 and the balance to be settled through the issue of 60 day non-interest
bearing debentures amounting to R10 million, which debentures will be settled in
cash and 60 day convertible debentures amounting to R7 million, which, if not
repaid within the 60 day period will be converted into preference shares bearing
a coupon rate of 9.25%, redeemable after 120 days. Any variation of the terms
of the debentures will be agreed between the parties in writing. Further
information on The Bay is reflected under "Details of projects acquired" below.
Acc-Ross, through its 100% subsidiary Accretio Property Development
(Proprietary) Limited ("Accretio"), has acquired 90% of Zamien Investments 6
(Proprietary Limited, which holds the development known as Icon@Sandhurst for a
purchase consideration of R37 million from Abalengani. The purchase
consideration will be settled by way the issue of 20 000 000 new shares in Acc-
Ross at an issue price of 86.7 cents per share, being the weighted average share
price of the company, totalling R17 340 000, cash of R2 660 000 and the balance
to be settled through the issue of 60 day debentures amounting to R17 million,
which debentures will be settled in cash or, if not repaid within the 60 day
period, will be converted into preference shares bearing a coupon rate of 9.25%,
redeemable after 120 days. Any variation of the terms of the debentures will be
agreed between the parties in writing. Further information on Icon@Sandhurst is
reflected under "Details of projects acquire" below.
Acc-Ross, through Accretio, has acquired 100% of the shares and loan account
claims in Hyde Park House (Proprietary) Limited, which holds the development
known as Icon@Hyde Park for a purchase consideration of R29 million from
Abalengani. The purchase consideration will be settled by way of transfer of
100% of Seven Seasons Trading 60 (Proprietary) Limited ("Seven Seasons") from
Tauve Developments (Proprietary) Limited ("Tauve"), a wholly owned subsidiary
of Accretio and which company holds the Royal Palms development to Abalengani.
Further information on Icon@Hyde Park is reflected under "Details of projects
acquired" below.
Acc-Ross, through Accretio, has sold 35% of Eagle Creek Investments 74
(Proprietary) Limited ("Eagle Creek"), which company holds the Lizard Point
development, to Abalengani for a purchase consideration of R24 337 000 in cash.
In addition, Abalengani is required to procure development funding for Phase 1
of Lizard Point of R100 million.
Acc-Ross, through Accretio, has sold 50% of Comuine Golf Estate Limitada
("Comuine"), which company holds the development at Vilanculos in Mozambique,
to Abalengani for a combination of a purchase consideration of R1 million, which
amount was required after the listing in order to secure the project.
Abalengani will be required to procure development funding of R90 million for
the project. In addition, as well as standing as part surety for the project
finance for the various phases of the development, with the initial funding
requirement for Phase 1 of Vilanculos being R20 million, Abalengani"s
participation in the project and the strength of its balance sheet will also
facilitate the completion of the development on an accelerated basis. Comuine
did not form part of the revised profit forecast for the year ending 28 February
2007 as published on SENS on 16 February 2006.
GRH has sold and transferred 20 stands as noted above to Abalengani at R1.5
million per stand. These stands were formerly debentures held by GRH, which
converted to stands in September 2005 following the proclamation of Phase 1 of
Gardener Ross Golf and Country Estate. The revenue and profit realised on the
sale of the stands will be recognised in the results of Acc-Ross for the year
ended 28 February 2006 and shareholders are referred to the trading statement
and pro forma financial effects below.
Accretio has sold 100% of Seven Seasons to Abalengani for a sale consideration
of R35 million and is also required to pay sales commission and a recoupment of
project management fees totalling R11 million. In addition, Abalengani will
assume the debt within Seven Seasons of approximately R16 million. The primary
rationale for Abalengani to acquire Seven Seasons was the initial acquisition of
proposed Stand 21 of which the Manor House forms part. Subsequent negotiations
led to the disposal of Seven Seasons in its entirety. The profit forecast of
Acc-Ross for the year ending 28 February 2007 estimated a profit of R17 084 490
to be realised from Seven Seasons, which will now be realised earlier than
anticipated. In addition, an estimated R25 million was to be spent on the
refurbishment of the Manor House in order to convert it to a boutique hotel,
which expenditure will no longer be incurred. The sale of Seven Seasons will
now be recognised in the results of Acc-Ross for the year ended 28 February 2006
and shareholders are referred to the trading statement and pro forma financial
effects below.
Details of projects acquired
The Bay
The Bay is a development on approximately 300 Hectares on the banks of the
Hartbeespoort Dam, next to Pecanwood and is currently valued at approximately
R230 million. The Bay has existing rights in place for residential, commercial,
retail and hotel development in conjunction with a golf course. Acc-Ross has
secured the "in principle" commitment of a signature golfer for the design of
the golf course and, together with the signature golfer, is in the process of a
new design layout for the development and a potential change in name for the
development. Although the development has approximately R300 million of
existing pre-sales, these will need to be reworked for the new design and the
fact that the golf course will now be a signature course. The residential
component, being the development of the golf course and approximately 1 000
stands for sale, is expected to be of similar size to that of the Gardener Ross
Golf and Country Estate. The hotel and commercial development is still in the
planning stage and Acc-Ross intends to bring in the commercial expertise for the
development through the sale of a portion of The Bay to an established company
with commercial and retail development experience. The Bay already has
facilities in place through Investec Bank Limited, which has funded
approximately R60 million of acquisition and development costs to date. The Bay
is not expected to have a major impact on the profit forecast for the year
ending 28 February 2007, as proclamation is only expected to commence in the
following year as is the nature of these development projects.
Icon@Sandhurst
Icon@Sandhurst is an upmarket residential development with developments rights
already in place for 95 top structure units in seven phases, currently valued at
around R110 million of which Accretio is acquiring 90%. The project has been
funded to date by Absa Bank Limited in the amount of approximately R60 million,
which interest will continue to be serviced by Abalengani on a loan account
basis for a period of 12 months. Additional funding will be secured for this
project, with peak (new) funding estimated at R50 million. Icon@Sandhust is not
expected to have a major impact on the profit forecast for the year ending 28
February 2007 due to the length of time of these development projects. Profit
before taxation on Icon@Sandhust is estimated to be around R68 million on
completion on estimated sales of R390 million. Abalengani has retained 10% in
the development.
Icon@Hyde Park
Icon@Hyde Park is a residential development of 29 upmarket apartments and
penthouses, currently valued at approximately R30 million, which is already
under construction. The total sales are projected at R109 million and total
cost of the development is expected to be around R60 million, providing for a
profit before taxation of R49 million. Currently Icon@Hyde Park has R79 million
in pre-sales. The project has been funded to date by Abalengani in the amount
of R9.8 million, which shareholder loan has been acquired as part of the
transaction. Absa Bank Limited has provided a total facility of R50 million, of
which R11 million has been utilised. Icon@Hyde Park is expected to be completed
by January 2007.
Vendor
The vendor comprises Abalengani Property Developments (Proprietary) Limited,
Abalengani Supplies (Proprietary) Limited, Xeedan Property Investments
(Proprietary) Limited, Abalengani Ancillary & Marketing Services (Proprietary)
Limited, Zamien Investments 67 (Proprietary) Limited, Zamien Investments 70
(Proprietary) Limited, Abalengani Motor Supplies (Proprietary) Limited and
Zunaid Abbas Moti.
Rationale for the transaction
The rationale for the transaction is to introduce additional projects to Acc-
Ross as a recognised property developer of upmarket, larger projects with
strategic relationships with signature golfers and top professional teams, which
Abalengani wished to access. In addition, Abalengani wished to acquire certain
of the stands currently held or under development by Acc-Ross for its own use
and/or development and wished to secure direct participation in certain of the
projects with Acc-Ross. Abalengani has also assisted in securing the
acquisition and funding of certain of the development projects for which
adequate capital was not raised in the listing, through the provision of loan
funding and sureties to financial institutions. The agreement also provides a
value-adding empowerment partner for Acc-Ross. Abalengani is an important value
adding and empowerment partner for the company going forward in the achievement
of its strategic objectives and goals.
Pro forma financial effects
The pro forma financial effects are the responsibility of the directors of Acc-
Ross. The pro forma financial effects have been prepared for illustrative
purposes only, to provide information on how the transaction would have impacted
on the published profit forecast of Acc-Ross and may not give a true picture of
Acc-Ross" financial position after the transaction.
Income statement
The pro forma financial effects of the above transaction on the profit forecast
for the year ended 28 February 2006 is reflected below as though the transaction
had been implemented with effect from 01 March 2005.
Before(1) After(3) % change
(Loss)/earnings per share (cents) (5.1) (1.24) 75.0%
Headline (loss)/earnings per share (2.1)(2) 1.37 166.8%
(cents)
Fully diluted shares (`000"s) (4) 877 930 034 975 930 034 11.2%
Notes
1. The profit forecast has been extracted from the announcement published on
SENS on 16 February 2006 as the income statement of Acc-Ross as published
in the prospectus as at 31 August 2005 is not comparable due to the
realisation of revenue of approximately R157 million subsequent to 31
August 2005 from the transfer of Phase 1 of Gardener Ross Golf and Country
Estate, as expected and outlined in the profit forecast.
2. Goodwill amounting to R25 484 428 has been added back to headline earnings
in the profit forecast. No further goodwill has been assumed on the
acquisitions in line with the company"s accounting policy and in accordance
with IFRS as the purchase price has been attributed to property.
3. The impact of the acquisitions of The Bay, Icon@Sandhurst and Icon@Hyde
Park and disposal of minority shareholding in Eagle Creek and Comuine will
not have a material impact on the results as costs are capitalised. The
results for February 2006 will primarily be affected by the sale of the 20
stands from GRH and the sale of Seven Seasons, both of which occurred in
the financial year ended 28 February 2006.
4. Information has been prepared on fully diluted share information in order
that the information is comparable to the profit forecast that was included
in the announcement as published on 16 February 2006.
Balance sheet
The pro forma financial effects on the balance sheet has been prepared for
illustrative purposes only, to provide information on how the transaction would
have impacted on the financial position of Acc-Ross, had the transaction and
issue of shares been effected on 31 August 2005, taking account the pro forma
effects on the balance sheet of the results of the offer on listing as published
on 16 February 2006. The nature of a pro forma balance sheet may not give a
true picture of Acc-Ross" financial position after the raising of the capital
and implementation of the variation agreements.
Before(1) After(3) % change
Net asset value per share (cents) 30.80 36.64 18.2%
Tangible net asset value per share (cents) 15.97(2) 23.22 44.5%
Fully diluted shares (`000"s) (4) 877 930 034 975 930 034 11.2%
Notes
1. The pro forma balance sheet has been extracted from the announcement
published on SENS on 16 February 2006 as the balance sheet of Acc-Ross as
published in the prospectus as at 31 August 2005 is not comparable.
2. Goodwill amounting to R130 181 601 has been deducted to establish tangible
net asset value.
3. The pro forma balance sheet has been adjusted for the impact of the
acquisitions of The Bay, Icon@Sandhurst and Icon@Hyde Park, the disposal of
minority shareholding in Eagle Creek and Comuine and the sale of the
debentures. The liabilities within Seven Seasons, which are taken over by
Abalengani, have not been adjusted for as they were not included in the
balance sheet as at 31 August 2005.
4. Information has been prepared on fully diluted share information.
Subsequent to 31 August 2005, the current portion of borrowings of R94 million
that was owed to Investec Bank Limited on the Golf and Country Estate
development, has been settled in full through proceeds realised on the transfer
of Phase 1 from October 2005 onwards. This has not been adjusted for in the pro
forma financial effects above.
Withdrawal of cautionary announcement
As a result of this announcement the cautionary announcement is now withdrawn.
Trading statement
As a result of the sale of the 20 stands (formerly debentures) and the sale of
Seven Seasons, which were not included in the profit forecast of Acc-Ross for
the year ending 28 February 2006, shareholders are advised that the results of
Acc-Ross are expected to be substantially better than those previously
anticipated and are expected to be between 55% to 75% better on a fully diluted
loss per share basis and 150% to 170% better, on a fully diluted headline
earning basis, with headline earnings moving from a loss position to an earnings
position. The earnings estimate of Acc-Ross has not been reviewed or audited by
the company"s auditors. Full details of the above will be provided when the
company publishes its audited results in due course.
In accordance with AltX Listings Requirements, shareholders are advised of the
risks of investing in a company listed on AltX and that the JSE does not
guarantee the viability or the success of a company listing on AltX. In terms of
JSE Listings Requirements a Designated Adviser has to be retained by the
company. The Designated Adviser is required to, inter alia, attend all board
meetings held by the company to ensure that all JSE Listings Requirements and
applicable regulations are complied with, approve the financial director of the
company and guide the company in a competent, professional and impartial manner.
If the company fails to retain a Designated Adviser it must make arrangement to
appoint a new Designated Adviser within 10 business days, failing which the
company faces suspension of trading of its securities. If a Designated Adviser
is not appointed within 30 days of its suspension, the company faces the
termination of its listing without an offer to minorities.
Designated Adviser
Arcay Corporate Services
Date of issue: 09 March 2006
Date: 09/03/2006 02:19:08 PM Produced by the JSE SENS Department
