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Proposed specific issue of linked units
Octodec Investments Limited
(Incorporated in the Republic of South Africa)
(Registration number 1956/002868/06)
Share Code: OCT
ISIN Code: ZAE000005104
(“Octodec”)
Premium Properties Limited
(Incorporated in the Republic of South Africa)
(Registration number 1994/003601/06)
Share Code: PMM
ISIN Code: ZAE000009254
(“Premium”)
Proposed specific issue of linked units
1. Background and Introduction
Octodec, Premium, IPS Investments (Proprietary) Limited (“IPS”) and City Property
Administration (Proprietary) Limited (“City Property”) have entered into an agreement dated
28 October 2013 (the “Repurchase Agreement”), relating to the specific repurchase by IPS
of City Property’s shares in IPS for a cash consideration of R127.5 million and the
repayment of City Property’s shareholders loan in IPS of R48.1 million (the “Specific
Repurchase”).
Currently, Octodec and Premium each hold 40% of the issued share capital of IPS and
City Property holds the remaining 20%. Following the Specific Repurchase, Octodec’s
and Premium’s shareholdings in IPS will increase to 50% each.
Pursuant to the Specific Repurchase, Octodec has entered into an agreement dated 28
October 2013 with City Property (the “Subscription Agreement”) in terms of which Octodec
will issue 9,122,981 linked units to City Property in exchange for the equivalent cash
consideration of R175.6 million equating to R19.25 per Octodec linked unit (the “Specific
Issue”).
City Property is a related party to Octodec as defined by the Listings Requirements of the
JSE Limited (“Listings Requirements”), due to the Wapnick Family being the shareholders
of City Property and material shareholders of Octodec. The Wapnick Family collectively
include JP Wapnick, S Wapnick and persons related or inter-related to them as defined by
section 2 of the Companies Act, 2008 (No. 71 of 2008), as amended.
The Specific Issue is subject to the fulfilment of the conditions precedent detailed in
paragraph 4 below.
2. Rationale for the Specific Repurchase and Specific Issue
Pursuant to the introduction of the Taxation Amendment Act (No. 22 of 2012) containing
section 25BB Real Estate Investment Trusts (“REIT”) tax dispensation, Octodec and
Premium are considering the possible merger of the two companies. In anticipation of a
merger, and in order to simplify their existing corporate structures, City Property has
agreed to dispose of its shareholding in IPS. The Wapnick Family, being the
shareholders of City Property, would like to maintain their investment indirectly in IPS
and as such have agreed to the Specific Issue pursuant to the Specific Repurchase.
The capital raised by Octodec as a result of the Specific Issue, will be utilised to repay debt
in the short term and to fund future acquisitions and redevelopments.
3. Terms of the Specific Issue
The linked units will be issued at a price of R19.25 per linked unit, which represents the
30-day volume weighted average traded price of Octodec linked units for the 30 trading
days ended 25 October 2013 (the “issue price”). The issue price represents a 15.6%
discount to Octodec’s adjusted net asset value (“NAV”) as at 31 August 2013. The
discount applied to the NAV in respect of the Specific Issue is equivalent to the
discount applied to the NAV of IPS’s shares in the case of the Specific Repurchase.
The adjusted NAV has been used to determine the discount applicable on both the
Specific Repurchase and the Specific Issue so as to provide Octodec, Premium and
City Property with the benefits that will accrue to IPS shareholders in the event IPS
becomes a REIT.
Linked unitholders are advised that whilst the issue price of R19.25 is cum distribution,
the linked units will be issued after the distribution date being the 11 November 2013,
and accordingly City Property will not be entitled to receive the distribution.
4. Conditions precedent
In terms of the Subscription Agreement, t he Specific Issue, is subject to the fulfilment of
the following conditions precedent, inter alia:
4.1.1 the approval of the issue of Octodec linked units to City Property by the JSE;
4.1.2 the approval of the Specific Issue by the linked unitholders of Octodec at the
general meeting, in terms of an ordinary resolution being passed by at least a
75% majority as required by section 5.51(g) of the Listings Requirements and
section 65(8) of the Companies Act;
4.1.3 the approval of the Specific Issue by the linked unitholders of Octodec at the
general meeting, in terms of a special resolution being passed as required in
section 41(1)(b) and section 65(10) of the Companies Act; and
4.1.4 the conclusion of the Repurchase Agreement and the fulfilment of all the
conditions to which that agreement may be subject, apart from any which may
refer to the conclusion of the Subscription Agreement.
The Wapnick Family are precluded from voting on the above resolutions.
5. Financial Effects of the Specific Issue
Based on Octodec’s consolidated reviewed financial results for the year ended 31
August 2013, the unaudited pro forma financial effects (“Financial Effects”) of the
Specific Repurchase and Specific Issue (the “transactions”) on Octodec’s earnings per
linked unit, headline earnings per linked unit, NAV per linked unit and net tangible asset
value (“NTAV”) per linked unit are set out below.
The Financial Effects are prepared for illustrative purposes only, and because of their
nature, may not give a fair presentation of Octodec's financial position or the effect and
impact of the Specific Issue. The Financial Effects are the responsibility of Octodec’s
board of directors and have been calculated by applying the accounting policies of
Octodec as at 31 August 2013.
Before
Effects of - Effects of - Issue After
Details transactions – Effects of - Loan
Additional IPS of new linked transactions -31
reviewed - 31 advance to IPS
income units August 2013
August 2013
Distributable earnings
attributable to linked 170 654 000 (7 376 000) 6 582 000 14 660 000 184 520 000
unitholders (Rands)
Earnings per linked unit
(cents) 511.14 (6.82) 11.12 17.76 493.13
Diluted earnings per
linked unit (cents) 511.14 (6.82) 11.12 17.76 493.13
Headline earnings per
linked unit (cents) 163.68 (6.82) 6.08 12.49 162.77
Diluted headline earnings
per linked unit (cents) 163.68 (6.82) 6.08 12.49 162.77
NAV (cents) 2 233.32 - (0.92) 148.73 2,207.58
NTAV (cents) 2 233.32 - (0.92) 148.73 2,207.58
Weighted average
number of linked units in 108 224 917 108 224 917 108 224 917 117 347 898 117 347 898
issue
Number of linked units in
issue 108 224 917 108 224 917 108 224 917 117 347 898 117 347 898
Notes:
1. Based on Octdec’s consolidated reviewed financial results for the year ended 31 August 2013.
2. The “Effects of - Loan advance to IPS” takes into account the impact of the Specific Repurchase.
3. The “Effects of - Additional IPS income” column takes into account Octodec’s increased shareholding in
IPS.
4. The “Effects of - Issue of new linked units” column takes into account the issue of linked units to City
Property in terms of the Specific Issue.
5. In calculating the Financial Effects on Earnings per linked unit and Headline earnings per linked unit, it
was assumed that the transactions were implemented on 1 September 2012 for purposes of the
statement of comprehensive income.
6. In calculating the Financial Effects on NAV and NTAV, it was assumed that the transactions were
implemented on 31 August 2013 for statement of financial position purposes.
7. Estimated once off transaction costs of R1,088,282 (including Value Added Tax) have been set-off
against share premium and debenture premium. Transaction costs relating to capital raised have
historically been treated by Octodec as set offs against share premium and debenture premium accounts
respectively.
8. There are no other post-balance sheet events which require adjustment to the pro forma Financial
Effects.
9. The capital raised as a result of the Specific Issue will be utilised to repay debt in the short term and to
fund future acquisitions and redevelopment opportunities.
6. Letters of Support
Octodec has received letters of support from linked unitholders to vote in favour of the
Specific Issue, representing 36.67% of Octodec’s issued linked unit capital able to vote
at the general meeting.
7. General meeting
The Specific Issue circular, containing a notice convening a general meeting of Octodec
linked unitholders to be held at 12h00 on or about 6 December 2013 at the offices of
Octodec to consider the resolutions relating to the Specific Issue, is expected to be
posted to Octodec linked unitholders on or about the 14 November 2013.
8. Salient dates and times relating to the specific issue
2013
Record date to determine which linked units holders are eligible to receive the circular Friday, 8 November
Circular posted to shareholders Thursday, 14 November
Last day to trade in order to be recorded in the register on the voting record date Friday, 22 November
Record date for voting Friday, 29 November
Form of proxy to be received by 10:00 Wednesday, 04 December
General meeting to be held at 12:00 Friday, 06 December
Results of general meeting to be released on SENS Friday, 06 December
Johannesburg
30 October 2013
Investment Bank and Sponsor
Nedbank Capital
Legal adviser
Tugendhaft Wapnick Banchetti and Partners
Date: 30/10/2013 10:30:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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