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DISPOSAL OF JASCO’S HEAD OFFICE PROPERTY TO GENESIS PROPERTIES (PROPRIETARY) LIMITED AND WITHDRAWAL OF CAUTIONARY
JASCO ELECTRONICS HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1987/003293/06)
Share Code: JSC & ISIN: ZAE000003794
("Jasco" or "the Company" or “the Group”)
DISPOSAL OF JASCO’S HEAD OFFICE PROPERTY TO GENESIS PROPERTIES
(PROPRIETARY) LIMITED AND WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
1. INTRODUCTION
1.1. Further to the cautionary announcement published on 22 June
2012, shareholders are advised that Jasco Properties
(Proprietary) Limited (the "Seller"), a wholly-owned
subsidiary of Jasco, has entered into a sale agreement dated
13 August 2012 (the "Sale Agreement") with Genesis Properties
(Proprietary) Limited (the “Purchaser”) to dispose of Jasco’s
Midrand head office property (the “Property Disposal”)
comprising the land and buildings situated at portion 198 of
the Farm Waterval 5, Registration division IR, Gauteng
Province, (the “Property”). In addition, the Seller and the
Purchaser will enter into a back-to-back lease agreement
whereby Jasco will lease the Property for a period of 12
years.
1.2. The Sale Agreement is effective on the date that all the
conditions precedent have been fulfilled, which date cannot
exceed six months from the date of signature of the Sale
Agreement or such later date as may be agreed in writing
between the Seller and the Purchaser (“Effective Date”). The
Property Disposal is effective on the date that transfer of
ownership is registered in favour of the Purchaser, which
event can only occur after the Effective Date (“Transfer
Date”).
2. THE DISPOSAL CONSIDERATION
2.1. In terms of the Sale Agreement, the Purchaser will acquire the
Property from the Seller on the following terms:
2.1.1. a purchase price of R60 million (including VAT at 0%) is
payable in cash to the Seller on the Transfer Date
(“Purchase Price”).
2.1.2. the Purchaser will pay a tenant installation allowance
of R5 million (excluding VAT) to the Seller on the
Transfer Date (“TIA”).
2.1.3. Possession of the Property shall be given by the Seller
to the Purchaser on the Transfer Date.
2.1.4. As security for such payment of the Purchase Price and
the TIA, the Purchaser shall within 21 days after the
signature date of the Sale Agreement, furnish to the
Seller a bank guarantee in the amount of R65,000,000 in
favour of the Seller (or its nominees) in a form
acceptable to the Seller, payable to the Seller or its
nominees free of exchange in cash and free of deduction
or set off whatsoever at Johannesburg on the Transfer
Date against the simultaneous registration of a mortgage
bond in favour of the particular financial institution
funding the Purchase Price and TIA for the Purchaser.
2.2. The cash proceeds paid to the Seller pursuant to the Property
Disposal will be used in part to settle the outstanding
mortgage on the Property and the balance of the surplus funds
will be used to meet current capital expenditure and working
capital requirements.
2.3. The independent valuation of the Property is currently being
finalised and the independent valuation report will be
available for inspection at the Company’s registered offices
in due course.
3. SALIENT FEATURES OF THE LEASE AGREEMENT
3.1. The Property measures 19 827 metres squared and is located in
Halfway House, Midrand. The Purchaser will acquire from the
Seller all of the rights and obligations relating to the
Property.
3.2. The Property will continue to be used as Jasco’s head office
and base of operations in Gauteng. Jasco Trading (Proprietary)
Limited (the “Tenant”) will enter into a non-cancellable 12
year lease agreement with the Purchaser with the effect from
the day after the Transfer Date (“Lease Agreement”).
3.3. The Lease Agreement, will include the following salient terms:
3.3.1. It is to be based on a triple net lease, in terms of
which all costs in relation to the operation,
maintenance, insurance, levies, municipal rates and
taxes in respect of the Property will be for the
account of the Tenant;
3.3.2. A monthly rental of R541 667 (excluding VAT),
escalating at 6% p.a. payable monthly in advance ; and
3.3.3. as previously mentioned in 2.1.2, the Purchaser will pay
the TIA to the Seller on the Transfer Date.
4. RATIONALE FOR THE TRANSACTION
4.1. As previously communicated to shareholders, the management of
Jasco have developed a number of key strategies to maximize
the return for shareholders which includes inter alia the
disposal and/or shutting down of non-core and/or non-
performing assets.
4.2. The Property is considered to be non-core to the business and
accordingly the proposed disposal thereof is expected to yield
the following benefits to Jasco:
4.2.1. Enable Jasco to increase its return on capital to the
extent that the net proceeds are invested into business
growth opportunities;
4.2.2. De-gearing of Jasco’s balance sheet thereby enabling
the Group to capitalize on future growth opportunities;
and
4.2.3. Enhanced cash utilization can be achieved in the short
term, as the short term cash realized from the disposal
proceeds exceeds the cash injection that could be
obtained by utilizing the existing bond facility on the
property.
5. CONDITIONS PRECEDENT TO THE DISPOSAL
5.1. The Property Disposal is subject to the following conditions
precedent (“CP’s”), which must be fulfilled and/or waived, in
the first instance, within 90 days of the signature date of
the Sale Agreement or in the event of there being any delays
in the Seller obtaining the necessary regulatory and
shareholder approvals, and such delays being beyond the
control of either the Seller or the Purchaser, the period for
fulfilment of the CP’s shall be automatically extended to the
Effective Date:
5.1.1. The Purchaser and the Tenant entering into the Lease
Agreement (detailed in 3 above) within 21 days of the
signature date of the Sale Agreement;
5.1.2. the securing, to the extent necessary, of all
regulatory approvals and consents required. It should
be noted that Jasco is required to provide the
Purchaser with plans, duly approved by the appropriate
local municipal authority, of the buildings and
improvements on the Property within six months of the
date of signature date of the Sale Agreement. The
parties have undertaken to do whatever necessary, sign
whatsoever documents are requisite and furnish whatever
information is required in order to enable the
expeditious fulfilment of this condition precedent;
5.1.3. all necessary shareholder approvals being obtained; and
5.1.4. the registration of the transfer of ownership of the
Property by the Deeds Office.
5.2. Shareholders will be advised once the Property Disposal has
become unconditional.
6. PRO FORMA FINANCIAL EFFECTS
The unaudited pro forma financial effects, for which the
directors of Jasco are responsible for the compilation, contents
and preparation thereof, are provided for illustrative purposes
only to show the effect of how the Disposal might impact the
earnings, headline earnings, diluted earnings and diluted
headline earnings per share as if the Disposal had taken effect
on 1 July 2011 and how the Disposal might impact the net asset
value and net tangible asset value per share as if the Disposal
had taken effect on 31 December 2011. Because of their nature,
the unaudited pro forma financial effects may not be a fair
reflection of Jasco’s financial position and performance or its
future results. The unaudited pro forma financial effects have
been compiled from the unaudited consolidated financial
statements of Jasco for the six months ended 31 December 2011 and
have been prepared and presented in a manner consistent with the
format and accounting policies adopted by Jasco (which comply
with International Financial Reporting Standards) and have been
adjusted as described in the notes below.
Before the After the
Disposal Disposal
(Actual)(1) (Pro forma) Change Change
(cents) (cents) (cents) (%)
Earnings per
share (“EPS”)(2)
(4) 6.4 11.9 5.5 84.9
Headline Earnings
per share
(“HEPS”) (2)(4) 6.9 5.7 (1.2) (17.5)
Diluted EPS (2)
(4) 6.4 11.9 5.5 83.4
Diluted HEPS (2)
(4) 6.9 5.7 (1.2) (17.5)
Net asset value
per share
(“NAVPS”) (3)(5) 224.0 230.4 6.4 2.9
Net tangible
asset value per
share (“NTAVPS”)
(3)(5) 145.7 152.1 6.4 4.4
Shares in issue
(‘000) 146 399 336 146 399 336 - -
Weighted average
number of shares
in issue (‘000) 140 918 344 140 918 344 - -
Diluted weighted
average number of
shares in issue
(‘000) 140 918 344 140 918 344 - -
Notes
(1) The “Before Published” financial information has been
extracted, without adjustment, from Jasco’s published
unaudited interim results for the six months ended 31 December
2011.
(2) For the purposes of calculating EPS, HEPS, diluted EPS and
diluted HEPS, the Actual Before and unaudited pro forma
figures are based on the weighted average number of shares in
issue of 140 918 344. Furthermore, the following key
assumptions have been made in the calculation of the unaudited
pro forma figures:
a. the Disposal became effective on 1 July 2011 and the
Disposal consideration was received on that date;
b. the Disposal consideration of R60 million was received in
cash;
c. the adjustments reflect the net pre-tax profit arising from
the Disposal, amounting to R 9 846 000, which has been
calculated from, inter alia the unaudited statement of
comprehensive income and statement of financial position of
the Property, extracted from the unaudited management
accounts of the Property. The board of Jasco is satisfied
with the quality of the unaudited management accounts of
the Property.
d. the adjustments include a pre-tax rental expense of R
4 569 000 that was straight lined over the actual lease
period, to reflect the new lease of the Property;
e. net pre-tax interest cost savings totalling R 2 213 000
arose due to the utilization of the Disposal consideration
for the following:
• to settle the mortgage loan on the Property, resulting
in an interest cost saving of R 786 000, calculated at
an interest rate of prime minus 1% p.a.; and
• to reduce the Company’s overdraft facilities resulting
in an interest cost saving of R 1 427 000 calculated at
an interest rate of 9% p.a.
f. The pre-tax profit is calculated taking pre-tax
transaction costs of R2 512 000 into account. The
transaction costs are not tax deductible as they are
capital in nature, but are added to the base cost of the
Property for purposes of calculating the taxable capital
gain;
g. a corporate tax rate of 28% was applied resulting in a
net tax saving arising from the Transaction of R222,000
which was recognised in the statement of comprehensive
income;
(3) For the purposes of calculating NAVPS and NTAVPS the Actual
Before and pro forma figures are based on the actual number of
shares in issue of 146 399 336. Furthermore, the following key
assumptions have been made in the calculation of the unaudited
pro forma figures:
a. the Disposal consideration was utilized to settle the
outstanding balance of the mortgage loan on the Property of
R 31 000 000 ;
b. the Disposal consideration was utilized to decrease the
Company’s overdraft facilities by R 29 000 000;
c. share capital and reserves include the net after tax profit
realised on the Disposal of R 9 409 000 in;
d. Property, Plant and Equipment decreased by R 50 154 000 to
reflect the book value of the Property that was sold in
terms of the Disposal;
e. A deferred Tax liability of R 6 653 000 was derecognised;
f. a capital gains tax (CGT) liability amounting to R
7 090 000 was raised;
(4) The Disposal has been accounted for in terms of IAS 16:
Property, Plant and Equipment.
7. WARRANTIES
7.1. The Seller has given warranties to the Purchaser which are
standard for a transaction of this nature.
8. CATEGORISATION AND CIRCULAR
8.1. The Disposal is categorised as a Category 1 transaction for
purposes of the listings requirements of the JSE Limited
(“Listings Requirements”) as it constitutes more than 25% of
Jasco’s market capitalisation and therefore requires
shareholder approval.
8.2. Shareholders are advised that a circular containing the full
details of the Disposal together with other corporate actions
and incorporating the notice of a general meeting of
shareholders will be posted to shareholders in due course. By
way of noting, the other corporate actions, will entail:
8.2.1. the conversion of the authorised and issued share
capital of Jasco from ordinary shares of par value to
ordinary shares of no par value;
8.2.2. the increase in the authorised share capital of Jasco
from 150,000,000 ordinary shares to 750,000,000
ordinary shares of no par value; and
8.2.3. the adoption of a new Memorandum of Incorporation.
9. WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
9.1 Jasco shareholders are advised that the cautionary
announcement which was published on 22 June 2012 is hereby
withdrawn.
Johannesburg
13 August 2012
Corporate Adviser & Sponsor: Grindrod Bank Limited
Legal Adviser: Rossouws, Lesie Incorporated
Reporting Accountants and Auditors: Ernst & Young Inc.
Date: 13/08/2012 05:46:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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