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Acquisition of hotels from Tsogo in exchange for shares & proposed share capital restructure: updated pro formas
HOSPITALITY PROPERTY FUND LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 2005/014211/06)
JSE share code: HPA ISIN: ZAE000203022
JSE share code: HPB ISIN: ZAE000203030
(Approved as a REIT by the JSE)
(“Hospitality” or “the company”)
ACQUISITION OF A PORTFOLIO OF HOTELS FROM TSOGO IN EXCHANGE FOR HOSPITALITY SHARES AND
PROPOSED SHARE CAPITAL RESTRUCTURE: UPDATED PRO FORMA FINANCIAL EFFECTS
Shareholders are referred to the circulars dated 8 March 2016, relating to:
- the restructure of Hospitality’s dual-class share capital structure to a single-class share capital structure (the “capital
restructure”); and
- the acquisition by Hospitality of the entire issued share capital of Fezisource Proprietary Limited, which will own ten hotel
properties, from Southern Sun Hotels Proprietary Limited, in exchange for at least 145 000 000 Hospitality ordinary shares
(the “Tsogo transaction”),
(together, the “circulars”).
Subsequent to the finalisation of the circulars, Hospitality released its unaudited consolidated interim results for the six months
ended 31 December 2015 (the “interim results”). The pro forma financial information of both the capital restructure and Tsogo
transaction, based on the interim results, are set out below. The pro forma financial information is the responsibility of the directors
of Hospitality and has been provided for illustrative purposes only.
Unless otherwise defined, words have the meanings ascribed to them in the circulars.
Capital restructure: Pro forma consolidated statement of financial position
Set out below is the pro forma consolidated statement of financial position of Hospitality reflecting the effects of the capital
restructure on Hospitality’s financial position, assuming the capital restructure was implemented on 31 December 2015. Because of
its nature, it may not fairly represent the financial position of Hospitality shareholders after the capital restructure.
The independent reporting accountants’ assurance report on the pro forma consolidated statement of financial position is available
for inspection during normal business hours at the registered office of Hospitality (The Zone, Phase 2, 2nd Floor, Loft Offices, East
Wing, Corner Oxford Road and Tyrwhitt Avenue, Johannesburg, 2196) from 14 March 2016 to 11 April 2016.
Before capital
restructure Post capital
R'000 31 December 2015 Adjustments restructure
ASSETS note 1 note 2
Non-current assets 4 901 812 4 901 812
Investment properties 4 873 266 4 873 266
Straight-line rent income accrual (255) (255)
Investment properties and related accrual 4 873 011 4 873 011
Furniture, fittings and equipment 558 558
Goodwill 12 000 12 000
Derivative asset 16 046 16 046
Investment in associates 197 197
Current assets 484 753 484 753
Non-current assets held for sale 216 721 216 721
Properties held for trading 22 309 22 309
Trade and other receivables 50 839 50 839
Cash and cash equivalents 194 884 194 884
TOTAL ASSETS 5 386 565 5 386 565
Equity 3 537 049 - 3 537 049
Share capital and share premium 2 934 087 - 2 934 087
Accumulated loss/profit 127 675 127 675
Fair value reserve 475 287 475 287
Non-current liabilities 1 547 863 - 1 547 863
Debentures - - -
Interest-bearing liabilities 1 547 863 1 547 863
Derivative liability - -
Current liabilities 301 653 301 653
Trade and other payables 71 653 71 653
Short-term portion of interest-bearing liabilities 230 000 230 000
Taxation - -
Debenture interest / profit distribution payable - -
TOTAL EQUITIES AND LIABILITIES 5 386 565 5 386 565
Shares in issue 288 571 006 185 509 932
Net asset value share
A share 12.26
B Share 12.26
Ordinary shares 19.07
Notes and assumptions
1. Extracted without adjustment from Hospitality’s unaudited consolidated interim results for the six months ended 31 December 2015.
2. A linked units were converted to A shares and B linked units were converted to B shares pursuant to the linked unit conversion with effect
from 28 September 2015.
3. Applied ratio of shares being issued is 1 ordinary share for every 1 A share held and 1 ordinary share for every 3.5 B shares held.
4. All costs and expenses attributable to the restructure are accounted for as part of the Tsogo transaction, and accordingly no costs have been
assumed for purposes of this pro forma statement of financial position.
Capital restructure: Pro forma consolidated statement of comprehensive income
Set out below is the pro forma consolidated statement of comprehensive income of Hospitality reflecting the effects of the capital
restructure on Hospitality’s financial position, assuming the capital restructure was implemented on 1 July 2015. Because of its
nature, it may not fairly represent the financial position of Hospitality shareholders after the capital restructure.
The independent reporting accountants’ assurance report on the pro forma consolidated statement of comprehensive income is
available for inspection during normal business hours at the registered office of Hospitality (The Zone, Phase 2, 2 nd Floor, Loft
Offices, East Wing, Corner Oxford Road and Tyrwhitt Avenue, Johannesburg, 2196) from 14 March 2016 to 11 April 2016.
Before capital
restructure Post capital
R'000 31 December 2015 Adjustments restructure
note 1 note 2 & 3
Revenue 235 587 235 587
Rental income - contractual 236 067 236 067
- straight-line (480) (480)
Expenditure (20 953) (20 953)
Operating Expenditure (20 953) (20 953)
Operating profit 214 634 214 634
Net finance cost (79 817) (79 817)
Finance income 4 499 4 499
Finance cost (84 316) (84 316)
Profit before debenture interest, goodwill impairment
and taxation 134 817 134 817
Debenture interest - - -
Loss before fair value adjustments, goodwill impairment
and taxation 134 817 134 817
(Loss)/profit on disposal of investment properties (3 121) (3 121)
Fair value adjustments 18 619 18 619
Investment properties before straight-lining adjustments - -
Straight-line rental income accrual 480 480
Total fair value of investment properties 480 480
Goodwill impairment -
Interest-rate swap 18 139 18 139
Profit before taxation 150 315 150 315
Equity accounted profit from associate after tax 144 144
Debenture discount amortisation (2 313) (2 313)
Taxation - -
Total profit and comprehensive income for the year 148 146 148 146
Distribution per linked unit
A-linked units
- Interim 77.00
- Final -
Total 77.00
B-linked units
- Interim 16.87
- Final -
Total 16.87
Earnings and distribution per linked unit
Profit for the year 148 146 148 146
Adjustments: Debenture interest - -
Earnings 148 146 148 146
Adjustments
Profit on disposal of investment properties 3 121 3 121
Fair value - investment properties revaluation - -
Fair value - straight-line rental income (480) (480)
Goodwill impairment - -
Headline earnings 150 787 150 787
HPF Employee Incentive Trust effects - 78
Fair value - interest rate swaps (18 139) (18 139)
Taxation on HPF Employee Incentive Trust - 100
Straight-line rental income 480 480
Debenture discount amortisation 2 313 2 313
Distributable earnings 135 441 135 619
Before capital
restructure Post capital
R'000 31 December 2015 restructure
A-shares B-shares Ordinary shares
Number of shares in issue 144 285 503 142 315 793 184 947 158
Weighted number of shares in issue 142 380 569 140 410 859 182 497 957
Cents Cents Cents
Distribution per share 77.00 16.87 73.01
Earnings and diluted earnings per share 52.39 52.39 81.18
Headline earnings and diluted headline earnings per share 53.32 53.32 82.62
Notes and assumptions
1. Extracted without adjustment from Hospitality’s unaudited consolidated interim results for the six months ended 31 December 2015.
2. A linked units were converted to A shares and B linked units were converted to B shares pursuant to the linked unit conversion with effect
from 28 September 2015.
3. Applied ratio of shares being issued is 1 ordinary share for every 1 A share held and 1 ordinary share for every 3.5 B shares held.
4. For earnings purposes, the number of shares in issue both as at 31 December 2015 and post capital restructure excludes those shares
accounted for as treasury shares in terms of IFRS.
5. All costs and expenses attributable to the capital restructure are accounted for as part of the Tsogo transaction, and accordingly no costs
have been assumed for purposes of this pro forma statement of comprehensive income.
Tsogo transaction: Pro forma consolidated statement of financial position
Set out below is the pro forma consolidated statement of financial position of Hospitality reflecting the effects of the Tsogo
transaction on Hospitality’s financial position, assuming the Tsogo transaction (including the capital restructure) was implemented
on 31 December 2015. Because of its nature, it may not fairly represent the financial position of Hospitality shareholders after the
Tsogo transaction.
The independent reporting accountants’ assurance report on the pro forma consolidated statement of financial position is available
for inspection during normal business hours at the registered office of Hospitality (The Zone, Phase 2, 2 nd Floor, Loft Offices, East
Wing, Corner Oxford Road and Tyrwhitt Avenue, Johannesburg, 2196) from 14 March 2016 to 11 April 2016.
Before Tsogo Acquisition
transaction Adjustments Post capital of Tsogo After
R'000 31 December 2015 restructure portfolio transaction
ASSETS note 1 note 2 note 3
Non-current assets 4 901 812 4 901 812 1 779 874 6 681 686
Investment properties 4 873 266 4 873 266 1 779 874 6 653 140
Straight-line rent income accrual (255) (255) - (255)
Investment properties and related accrual 4 873 011 4 873 011 1 779 874 6 652 885
Furniture, fittings and equipment 558 558 - 558
Goodwill 12 000 12 000 - 12 000
Derivative asset 16 046 16 046 16 046
Investment in associates 197 197 - 197
Current assets 484 753 484 753 (16 900) 467 853
Non-current assets held for sale 216 721 216 721 216 721
Properties held for trading 22 309 22 309 22 309
Trade and other receivables 50 839 50 839 50 839
Cash and cash equivalents 194 884 194 884 (16 900) 177 984
TOTAL ASSETS 5 386 565 5 386 565 1 762 974 7 149 539
Equity 3 537 049 - 3 537 049 1 762 974 5 300 023
Share capital and share premium 2 934 087 - 2 934 087 1 762 974 4 697 061
Accumulated loss/profit 127 675 127 675 - 127 675
Fair value reserve 475 287 475 287 - 475 287
Non-current liabilities 1 547 863 - 1 547 863 - 1 547 863
Debentures - - - - -
Interest-bearing liabilities 1 547 863 1 547 863 - 1 547 863
Derivative liability - - - -
Current liabilities 301 653 301 653 - 301 653
Trade and other payables 71 653 71 653 - 71 653
Short-term portion of interest-bearing
liabilities 230 000 230 000 - 230 000
Taxation - - - -
Debenture interest / profit distribution
payable - - - -
TOTAL EQUITIES AND
LIABILITIES 5 386 565 5 386 565 1 762 974 7 149 539
Shares in issue 288 571 006 185 509 932 145 000 000 330 509 932
Net asset value share
A share 12.26
B Share 12.26
Ordinary shares 19.07 12.16 16.04
Notes and assumptions
1. Extracted without adjustment from Hospitality’s unaudited consolidated interim results for the six months ended 31 December 2015.
2. The dual-class share capital structure consisting of A and B shares was converted into a single-class share capital structure. The applied
ratio of shares being issued is 1 ordinary share of every 1 A share held and 1 ordinary share of every 3.5 B shares held;
3. The valuation of the investment properties was obtained from the independent property valuer for the Tsogo portfolio with the equivalent
shares issued to finance the Tsogo transaction. The distribution payable is the profit as a result of the actual results relating to the Tsogo
portfolio as presented by Tsogo. The purchase consideration in respect of Newco was settled through the issue of 145 000 000 Hospitality
ordinary shares.
4. The estimated transaction costs of R16 900 000, directly attributable to the Tsogo transaction, has been capitalised to share capital and
share premium in accordance with IAS 32: Financial Instruments: Presentation.
15 March 2016
Corporate advisor and transaction sponsor to Hospitality Investment bank and transaction sponsor to Tsogo
Java Capital Investec Corporate Finance
Corporate law and tax advisors to Hospitality Corporate law advisor to Tsogo
Edward Nathan Sonnenbergs Taback and Associates
Independent reporting accountants to Hospitality
KPMG
Date: 15/03/2016 12:10:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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