iFOUR PROPERTIES LIMITED - TERMS ANNOUNCEMENT OF IFOUR PROPERTIES LIMITED ON THE
ACQUISITION OF THE EQUITY AND LOAN ACCOUNTS IN SIPAN 1 (PROPRIETARY) LIMITED
(`SIPAN`).
iFOUR PROPERTIES LIMITED
(Incorporated in the Republic of South Africa)
JSE code: IFR ISIN: ZAE000039236
(Registration number 2001/016118/06)
(`iFour` or `the Company`)
TERMS ANNOUNCEMENT OF IFOUR PROPERTIES LIMITED ON THE ACQUISITION OF THE EQUITY
AND LOAN ACCOUNTS IN SIPAN 1 (PROPRIETARY) LIMITED (`SIPAN`).
1. Introduction
Linked unit holders are advised that, subject to the suspensive conditions
referred to in paragraph 5 below, an agreement has been concluded between iFour
and Pangbourne Properties Limited (`Pangbourne`) for the purchase by iFour of
the issued share capital of Sipan and all claims that Pangbourne has against
Sipan, its wholly owned subsidiary, as at the effective date (which is expected
to be Monday, 28 June 2004) (`the effective date`), in terms of such agreement
(`the Sipan acquisition`).
Sipan, has acquired eight `A grade` retail, office and industrial properties
including the MTN Call Centre in the Mount Edgecombe Office Estate, Venda Plaza
in Thohoyandou, Intersite Hi-tech Park and Kosi Place in Umgeni Business Park,
Kopanong Retail Centre in Ivory Park, Sebokeng Retail Centre, Park Central
Retail Centre in Johannesburg and the Meadowdale Cargo Motor Centre (`the Sipan
properties`).
2. Rationale for the transaction
The purpose of the Sipan acquisition is to enable iFour to acquire the Sipan
properties in accordance with iFour`s stated objective of growing the size of
its property portfolio without sacrificing the quality thereof. The recent
interest rate environment and the renewed interest in the listed property sector
have resulted in a competitive environment for the acquisition of `A grade`
properties. The ability to make acquisitions for cash places the acquirer at a
competitive advantage from a pricing and timing perspective. As part of its
commitment to assist iFour`s strategy, Pangbourne, which has a significant
interest in iFour, established Sipan as a special purpose vehicle, and made a
series of cash offers to acquire properties in the market and assemble the Sipan
portfolio to meet iFour`s investment criteria. This initiative has enabled iFour
to maintain a prudent gearing level of 55% and acquire the Sipan properties
directly without embarking on a time-consuming capital-raising exercise.
Furthermore, the acquisition of Sipan brings certainty as to the date of
transfer of the ownership of assets acquired and enables iFour to eliminate the
risk of the dilutionary effect on its distribution of issuing new iFour linked
units to vendors or issuing new iFour linked units in terms of a vendor placing
arising from delays in the transfer of physical property.
3. Terms of the Sipan acquisition
iFour will acquire the issued share capital of Sipan and Pangbourne`s claims
against Sipan for a purchase consideration of approximately R128,3 million,
calculated on the following basis:
* R289,0 million, being an amount comprising -
R278,8 million, being an amount equal to the consideration paid by
Sipan for the Sipan properties; and
a facilitation fee of R10,2 million, taking into account the aggregate
appreciation in value of the Sipan properties from date of acquisition
to the effective date;
* less approximately R160,7 million, being the draw down portion of
Sipan`s borrowing facilities (all inclusive `the consideration`).
In addition, the costs of R8,9 million (which includes a promoters fee of R2,8
million payable to Pangbourne) (`the costs`) are for the account of iFour for
the establishment and acquisition of Sipan.
The consideration and costs of approximately R137,3 million, assuming that all
of the Sipan properties have been transferred by the effective date will be
discharged partly in cash from resources available to iFour and by the issue of
16 458 008 new iFour linked units, at a minimum issue price of R5.90 each (`the
consideration linked units`). Pangbourne supports the iFour growth strategy and
is willing to take up the maximum number of linked units available as part of
the consideration and costs, but iFour will determine the exact number to be
issued to Pangbourne before the effective date. Sipan (and indirectly iFour)
will be responsible for the payment of the purchase consideration and costs, if
any, of the Sipan properties have not been transferred by the effective date,
with the consideration and costs adjusted accordingly.
4. The SRP ruling
Pangbourne`s interest in iFour will increase from approximately 44,8% to 52% in
iFour, which would ordinarily, under Rule 8.1 of The Securities Regulation Code
on Takeovers and Mergers (`the Code`) trigger the requirement for Pangbourne to
extend a mandatory offer to iFour`s other linked unit holders. 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. iFour linked unit holders are referred
to the Pangbourne terms announcement released in conjunction with this
announcement for more information.
5. Suspensive conditions
The Sipan acquisition is subject to the following suspensive conditions:
The approval of the Sipan acquisition by iFour shareholders in general meeting;
and
Competition Commission approval to the Sipan acquisition.
6. Financial effects and profit forecast
Presented in the table below are the unaudited pro forma financial effects of
the Sipan acquisition based on the results for the six months ended 31 December
2003 and the forecast distribution per linked unit for the years ending 30 June
2004 and 30 June 2005.
The pro forma financial information should be read with caution, as the trading
results of the Sipan properties are not representative of their respective
trading results going forward. Certain properties were not rental properties
during the period as they were in the process of construction.
The pro forma financial information has been prepared for illustrative purposes
only and because of its nature, may not give a fair reflection of iFour`s
financial position after the Sipan Acquisition or results of operations going
forward.
Before 1 After Sipan %Change Forecast Forecast
6 months acquisition Year Year
31 2 30 June 30 June
December 6 months 2004 2005
2003 31 December
2003
Earnings per linked unit 38,17 29,33 (23)
(cents) 3
Headline earnings per
linked unit (cents) 3 37,15 28,51 (23)
Earnings per share 1,20 0,96 (20)
(cents) 3
Headline earnings per 0,18 0,14 (22)
share (cents) 3
Forecast distribution per 78,00 82,00
linked unit for the year
(cents)
Net asset value per share 60,21 69,37 15
(cents) 4
Weighted average number
of linked units/shares 94 112 117 382 - 110 494 149 237
(`000)
Number of linked
units/shares in issue 124 140 147 410 -
(`000)
Notes and assumptions
1. Extracted from iFour`s published reviewed financial results for the 6
months ended 31 December 2003;
2. Illustrates the effect after the Sipan acquisition;
3. Earnings and headline earnings effects are calculated on the following
assumptions:
- the Sipan acquisition was effective 1 July 2003;
- the cash raised following a vendor placement of 6 811 744 linked units,
assumed to have been placed with effect 1 July 2003, was utilised to settle the
cash portion of the consideration;
- the pro forma earnings, for 6 months, of the Sipan properties for their
respective latest financial periods have been aggregated; and
- interest on the debt raised to settle the consideration has been calculated
at an average rate for the period of 11,25%.
4. Net asset value effects are calculated on the following assumptions:
the Sipan acquisition was effective 31 December 2003; and
the consideration was settled on 31 December 2003 by the issue of the
consideration shares and cash, raised following the placement of 6 811 744
units, placed in terms of a vendor placing prior to the date of this
announcement.
5. The principal assumptions underlying the forecast distribution for the
respective years are as follows:
Year ending 30 June 2004
existing occupancy levels will remain substantially unchanged;
inflation remaining at current levels; and
an average interest rate of 11,5 %, before tax, being paid on the existing debt
funding.
Year ending 30 June 2005
the Sipan acquisition and transfer of certain independent property acquisitions,
details of which will be provided in the circular to iFour linked unit holders
regarding the Sipan acquisition, will be effective 1 July 2004;
no further potential acquisitions or linked unit issues have been taken into
consideration;
existing occupancy levels will remain substantially unchanged;
inflation remaining at current levels; and
an average interest rate of 11,5 %, before tax, being paid on the existing debt
funding.The report of PricewaterhouseCoopers Inc, being the independent
reporting accountants` report on the distribution forecasts, is available for
inspection at iFour`s registered address.
Documentation
A circular containing details of the transaction and the shareholders meeting
will be posted to iFour linked unit holders on or about 8 June 2004.
Withdrawal of cautionary
iFour linked unit holders are referred to the iFour cautionary announcement
dated Friday, 23 April 2004, and are advised that caution is no longer required.
24 May 2004
Johannesburg
Sponsor
PricewaterhouseCoopers Corporate Finance (Pty) Ltd
Corporate Law Advisers and Consultants
Edward Nathan & Friedland (Pty) Ltd
Date: 24/05/2004 08:01:05 AM Produced by the JSE SENS Department
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