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CAP - Cape Empowerment Limited - Proposed subscription by Cape Empowerment

Release Date: 21/06/2012 16:00
Code(s): CAP
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CAP - Cape Empowerment Limited - Proposed subscription by Cape Empowerment Trust Limited, a wholly owned subsidiary of CEL ("CET") for B-Linked units in the capital of ascension properties limited CAPE EMPOWERMENT LIMITED (Incorporated in the Republic of South Africa) (Registration number 1987/001807/06) JSE Code CAP ISIN ZAE0001450066 ("CEL", "the company" or "the group") PROPOSED SUBSCRIPTION BY CAPE EMPOWERMENT TRUST LIMITED, A WHOLLY OWNED SUBSIDIARY OF CEL ("CET") FOR B-LINKED UNITS IN THE CAPITAL OF ASCENSION PROPERTIES LIMITED ("ASCENSION") Shareholders are referred to the announcement dated 9 December 2012 wherein they were advised of the terms and conditions of a subscription agreement, dated 15 November 2011 ("the subscription agreement"), between CET and Ascension and are advised that the subscription agreement has been replaced with the amended and restated subscription agreement between Ascension and CET, dated 22 March 2012 ("the restated subscription agreement"), on the terms and conditions set out below. 1. INTRODUCTION, terms and rationale 1.1 Ascension (previously Grey Jade Trade and Invest 85 Proprietary Limited) was established on 23 August 2006 as a black owned and managed property loan stock company to invest in assets and opportunities within the commercial property sector in South Africa, focussing on Government tenanted commercial office buildings. The group is a founding shareholder in Ascension. 1.2 Ascension`s property portfolio is comprised of quality assets with a strong robust tenant base which, coupled with low vacancies and medium to long-term expiry profiles, are expected to provide adequate stability for the creation of earnings and capital growth over the long term. 1.3 Ascension is immediately well positioned to take advantage of opportunities for acquisitive and organic growth. The initial acquisitive growth will be achieved through the acquisition of selected properties, whereas the organic growth is intended to be achieved through the renovation of vacant portions of some of the existing properties with the intention to secure further anchor tenants and maximise earnings from existing properties. 1.4 During 2012 Ascension changed its capital structure to create A- and B- Linked Units. Ascension has successfully listed on the JSE on 11 June 2012. 1.5 At the date of listing Ascension had an existing loan facility of R40,500,000 with CET ("loan facility"). CET and Ascension entered into the restated subscription agreement in terms whereof CET has agreed to subscribe for 79 411 765 B-linked units at a subscription price of 51 cents per B-Linked Unit, in full discharge of the loan facility ("first subscription"). 1.6 In addition to the above CET, in terms of the restated subscription agreement, agreed to subscribe for a further 38 885 210 B-Linked Units at 51 cents per B-Linked Unit in full discharge of an existing shareholder`s loan of CET to Ascension in the amount of R19 831 470 ("second subscription"). 1.7 On the assumption that CEL shareholders approve the resolutions at the general meeting of shareholders referred to in paragraph 3 below, CET will own 118 297 000 B-Linked Units, which represents 35.64% of the total Linked Units in Ascension after the subscriptions. 1.8 The purpose of the subscriptions is to increase CET`s holdings of Linked Units in Ascension. The proposed investment fits into CEL`s investment criteria of cash generative businesses with good long term growth potential. The Ascension Linked Units provides CEL with an immediate cash return on its investment in the form of bi-annual distributions and the board is confident that the Linked Units will deliver strong growth in both income and capital values. 2. Pro forma financial effects The pro forma financial effects of the subscriptions on CEL`s earnings per share, headline earnings per share, net asset value and net tangible asset value per share for the year ended 31 December 2011 are set out below, are prepared for illustrative purposes only, and, because of their pro forma nature, may not give a fair reflection of CEL`s financial position or the effect and impact of the subscriptions on CEL. The financial effects are the responsibility of the board of directors of CEL. CEL accounts for its investment in Ascension in line with its accounting policy of carrying financial assets at fair value and these financial effects have been prepared on that basis. Before Adjustmen Adjusted Sub- Pro forma t - GPI before scriptions After -
disposal adjust-ments Earnings 8.7 (0.1) 8.4 per share (cents) (0.2) 8.5 Headline earnings (0.1) 7.8 per share 8.1 (cents) (0.2) 7.9 NAV per 60.0 (0.1) 59.5 share (cents) (0.4) 59.6 Tangible 60.0 (0.1) 59.5 NAV per share (0.4) 59.6 (cents) Weighted 520 284 520 284 number of shares in issue 520 284 (`000) Number of 520 284 520 284 shares in issue 520 284 (`000) NOTES: * Before column - The Before column is extracted from the reviewed provisional results of CEL for the year ended 31 December 2011. * Adjustment - GPI disposal - The GPI disposal adjustment column reflects the financial effects of the disposal of 10 701 220 GPI shares by CET for a total consideration of R25 147 867 as set out in the circular to shareholders dated 5 March 2012 and approved by shareholders on 3 April 2012. - For statement of financial position purposes the disposal proceeds of R25 147 867 and the special GPI dividend of 60 cents per share were received in cash on 31 December 2011. - For statement of comprehensive income purposes: the disposal proceeds of R25 147 867 were received in cash on
1 January 2011 and the special GPI dividend of 60 cents per share was received in cash on 31 December 2011; the disposal proceeds were invested in a money market investment with an after tax return of 4,9%.
- The adjusted before column reflects the 31 December 2011 reviewed provisional results, adjusted for the pro forma financial effects of the GPI disposal. * Subscription adjustments - The pro forma financial effects are based on the CEL reviewed consolidated provisional results to 31 December 2011. - For statement of financial position purposes it is assumed that the transaction took place on 31 December 2011 - For statement of comprehensive income purposes it is assumed that the transaction took place on 1 January 2011, being the first day of the reporting period. - For statement of comprehensive income purposes it is assumed that the B-Linked Units would have yielded a return equal to the distributable income of Ascension for the 2011 financial year. The reduction in investment income of approximately R149 000 resulted because the distributions for the period would have been less than the interest earned on the loan. - There is no tax effect as CET has an assessed loss. - Transaction costs of R368 523 have been taken into account and credited to cash and cash equivalents. - Other than for transactions costs, the adjustments are expected to have a continuing effect on the results of CEL. 3. Condition The subscriptions are subject to the shareholders of CEL passing the necessary resolutions to approve the transaction as required in terms of the JSE Listings Requirements at the general meeting to be held on 19 July 2012. 4. CATEGORISATION AND GENERAL MEETING THE FIRST SUBSCRIPTION IS CATEGORISED AS A CATEGORY 1 TRANSACTION AND THE SECOND SUBSCRIPTION IS CATEGORISED AS A CATEGORY 2 TRANSACTION. THE JSE REGARD THE SUBSCRIPTIONS AS RELATED PARTY TRANSACTIONS BY CEL. THE SUBSCRIPTIONS REQUIRE SHAREHOLDER APPROVAL AT A GENERAL MEETING AND THE SUBMISSION TO THE JSE AND SHAREHOLDERS OF THE FAIRNESS OPINION OF AN INDEPENDENT PROFESSIONAL EXPERT ACCEPTABLE TO THE JSE. CEL HAS APPOINTED MAZARS CORPORATE FINANCE (PTY) LTD ("MAZARS") AS INDEPENDENT PROFESSIONAL EXPERT, AND THEY HAVE DECLARED THAT THE TERMS OF THE SUBSCRIPTIONS ARE FAIR AS FAR AS CEL SHAREHOLDERS ARE CONCERNED. A circular containing further details of the subscriptions, a notice to convene a general meeting of CEL shareholders to be held on 19 July 2012 to approve the subscriptions, the abridged valuation report of an independent valuer on the Ascension property portfolio and the fairness opinion of Mazars will be posted to shareholders today. Cape Town 21 June 2012 Sponsor Sasfin Capital (A division of Sasfin Bank Limited) Legal advisors Cliffe Dekker Hofmeyr Inc. Independent professional expert Mazars Corporate Finance (Pty) Ltd Independent valuer Peter Parfitt Quadrant Properties (Pty) Ltd Date: 21/06/2012 16:00:01 Supplied by www.sharenet.co.za Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on, information disseminated through SENS.

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