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Acquisition of the airport land property
EQUITES PROPERTY FUND LIMITED
(formerly VB Transport (Proprietary) Limited)
(Incorporated in the Republic of South Africa)
(Registration number 2013/080877/06)
JSE share code: EQU ISIN: ZAE000188843
(Approved as a REIT by the JSE)
(“Equites”)
ACQUISITION OF THE AIRPORT LAND PROPERTY
1. INTRODUCTION
Equites has concluded an agreement (“acquisition agreement”) for the acquisition of Remainder Erf 113223, Airport City,
in the City of Cape Town, Western Cape Province, held by deed of transfer T11880/2011 and all improvements thereof,
measuring 15.75 hectares in extent, which land is vacant and undeveloped (“the airport land property”) from (“Dormell”),
the shareholders of which are the Anke & Sebastian Trust (of which Johnny Cullum, a non executive director of Equites,
is a beneficiary and trustee) and the Von Klopmann Family Trust (“the acquisition”).
2. RATIONALE FOR THE ACQUISITION
The board is of the view that the airport land property is amongst the most valuable land remaining available for the
development of A-grade industrial distribution warehouses in the Western Cape. The location of the airport land property
in the sought after airport node, and the close proximity to the road infrastructure makes the location an ideal place for
companies with a logistics and distribution focus.
3. DETAILS OF THE AIRPORT LAND PROPERTY
3.1. The airport land property is located at 1AJ Modderdam Road which is within a prime industrial area, in Airport
City, Cape Town. The airport land property is freehold with an extent of 157 200m2.
3.2. The airport land property is currently zoned for industrial use and has been subdivided into 19 light industrial
erven.
3.3. The relevant authorities have approved an application by Dormell for a non-substantive amendment to the
approval to change from 19 to 5 erven. An appeal has been lodged against this amendment. This matter will be
more closely looked at during the due diligence investigation.
4. MECHANICS OF THE ACQUISITION
4.1. Purchase consideration and interest
4.1.1. In terms of the acquisition agreement, Equites will acquire the airport land property from Dormell
for a purchase consideration (exclusive of VAT) which will be calculated as follows:
A = (B multiplied by C) – D
Where:
A is the purchase consideration;
B is the extent of the land on which the purchase consideration is based being, 143 500 square
meters;
C is the price per square metre being, R1 200 per square meter; and
D is the infrastructural costs, which is estimated and capped at R30 000 000.
4.1.2. Based on the formula above, the purchase consideration is a maximum amount of R142 200 000
and will be settled through the issue of up to 14 220 000 shares as further detailed in paragraph 4.2
below.
4.2. Payment of purchase consideration
4.2.1. The purchase consideration is payable by Equites to Dormell, as follows:
4.2.1.1. on the date of registration of transfer of the airport land property into the name of
Equites (“the transfer date”), as security for the due fulfilment of the obligations of
Equites to make the requisite payments, the payment of a refundable deposit to
Dormell, in the amount of R45 000 000 (“the deposit”);
4.2.1.2. on the transfer date, by Equites issuing to Dormell one Equites share at an issue
price of R10.00 per share; and
4.2.1.3. on the final payment date, subject to the repayment of the deposit, by Equites
issuing to Dormell such number of Equites shares as is equal to the balance of the
purchase consideration divided by the issue price per share of R10.00.
4.2.2. On the final payment date, Dormell will repay the deposit and receive all the shares contemplated
in paragraph 4.2.1.3 above.
4.3. Effective date and warranties
4.3.1. The effective date of the acquisition is the transfer date, which shall occur as soon as reasonably
possible after the date on which all of the conditions precedent set out in paragraph 5 below have
been fulfilled and/or waived. It is anticipated that transfer should occur during June 2015, subject
to the fulfilment of the conditions precedent.
4.3.2. All risks in and benefits attaching to the airport land property will pass to Equites on the transfer
date.
4.3.3. Warranties commonly provided for transactions of this nature have been provided by Dormell to
Equites.
4.4. Infrastructural services
4.4.1. Equites has agreed to appoint CSV Construction (Proprietary) Limited (“CSV Construction”) to
construct and install all the infrastructural services in accordance with the infrastructural services
contract, provided that the pricing of CSV Construction in terms of the said contract is competitive
and market related.
4.4.2. Should Equites wish to undertake any development work on the airport land property, Equites will
notify CSV Construction of its intention to do so and negotiate with CSV Construction in good
faith with a view for the development work to be undertaken by CSV Construction, provided that
the pricing of CSV Construction is competitive and market related.
5. CONDITIONS PRECEDENT
The acquisition is subject to the fulfilment of the following conditions precedent:
5.1. Dormell obtaining the requisite shareholders’ approval on or before 28 February 2015;
5.2. Equites obtaining any regulatory consents pursuant to the conclusion of the acquisition on or before
30 April 2015;
5.3. Equites obtaining the requisite shareholders’ approval on or before 30 April 2015;
5.4. that by no later than 30 April 2015, Equites delivering a written notice to Dormell confirming that:
5.4.1. Equites is satisfied with the results of the due diligence investigation in respect of the airport land
property; and
5.4.2. the board of directors of Equites has approved the acquisition contemplated in the acquisition
agreement; and
5.5. that by no later than 31 March 2015, the infrastructural services contract is concluded by and between Equites and
CSV Construction.
6. RELATED PARTY CONSIDERATIONS
6.1. The Anke & Sebastian Trust, which is an associate of Johnny Cullum, a non-executive director of Equites, is a
50% shareholder in Dormell. Accordingly, the acquisition constitutes an acquisition from an associate of a related
party in terms of the JSE Listings Requirements.
6.2. Accordingly, the acquisition is subject to approval by way of an ordinary resolution of the Equites shareholders
(excluding the votes cast by Johnny Cullum and his associates).
7. CONSOLIDATED PRO FORMA FINANCIAL EFFECTS OF THE ACQUISITION
7.1. The consolidated pro forma financial effects of the acquisition on Equites’ basic earnings per share, headline
earnings per share, diluted basic earnings per share, diluted headline earnings per share and distribution per share
(collectively, “earnings and distribution per share”) for the six months ended 31 August 2014 and net asset
value per share and tangible net asset value per share as at 1 March 2014 are set out below.
7.2. Due to its nature, the consolidated pro forma financial effects, the consolidated pro forma statement of
comprehensive income and the consolidated pro forma statement of financial position, (collectively, “the
consolidated pro forma financial information”), may not give a fair reflection of Equites’ financial position,
changes in equity, results of operations and cash flows subsequent to the acquisition.
7.3. The consolidated pro forma financial information is the responsibility of the directors and has been prepared for
illustrative purposes only, to provide information on how the transaction may have impacted on the historical
financial results of Equites for the six months ended 31 August 2014.
7.4. The consolidated pro forma financial information has been prepared in accordance with Equites’ accounting
policies and in compliance with IFRS.
7.5. The consolidated pro forma financial effects of the acquisition on Equites are as follows:
Before the Pro forma after Percentage
acquisition the acquisition Change
(%)
Basic earnings per share (cents) 19.8 16.5 (16.7%)
Headline earnings per share (cents) 20.9 17.4 (16.7%)
Diluted basic earnings per share (cents) 19.8 16.5 (16.7%)
Diluted headline earnings per share (cents) 20.9 17.4 (16.7%)
Distribution per share (cents) 21.10 18.6 (11.4%)
Net asset value per share (Rand) 10.1 10.1 -
Net tangible asset value per share (Rand) 10.1 10.1 -
Actual number of shares in issue 113 575 515 127 795 515 12.5%
Weighted average number of shares in issue 72 070 385 86 290 385 19.7%
7.6. Notes and assumptions
7.6.1. The amounts in the “Before the acquisition” column where extracted, without adjustment, from
Equites’ published unaudited consolidated results for the six months ended 31 August 2014.
7.6.2. The amounts set out in the “Pro forma after the acquisition” column reflect the impact on the
historical financial results of Equites for the six months ended 31 August 2014 assuming that the
acquisition is implemented on 1 March 2014 for purposes of earnings and distribution per share,
and on 31 August 2014 for purposes of net asset value per share and net tangible asset value per
share.
7.6.3. The acquisition will have no immediate impact on total comprehensive income or distributable
earnings. As explained in paragraph 4 above, one Equites share will be issued on the transfer date,
with the balance of the purchase consideration being issued on the final payment date. For the
purpose of illustrating the potential dilutive effect, it was assumed that all shares will be in issue
from 1 March 2014.
7.6.4. The acquisition has been accounted for under ISA 40 (Investment property) and the cost of the land
was calculated as the transaction value plus estimated transaction costs.
7.6.5. The purchase consideration is assumed to be R142.2 million. On the transfer date, one Equites
share will be issued to Dormell, which will increase stated capital by R0.01125, which has been
rounded to nil.
7.6.6. The balance of the purchase consideration will be settled through the issue of Equites shares on the
final payment date (as explained in paragraph 4 above), which has been accounted for in terms of
IFRS 2 (Share-based payments). As such, the fair value of the land acquired has been recognised
against equity.
8. DOCUMENTATION
A circular detailing the terms of the acquisition, incorporating a fairness opinion and a notice convening a general meeting
in order to pass the necessary resolutions to implement the acquisition will be posted to Equites shareholders shortly.
25 February 2015
Corporate advisor and sponsor
Java Capital
Legal advisor to Equites
DLA Cliffe Dekker Hofmeyr
Independent reporting accountants
Moore Stephens Chartered Accountants(SA)
Date: 25/02/2015 03:10:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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