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PEMBURY LIFESTYLE GROUP LIMITED - TERMS ANNOUNCEMENT AND WITHDRAWAL OF CAUTIONARY

Release Date: 16/05/2017 17:00
Code(s): PEM     PDF:  
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TERMS ANNOUNCEMENT AND WITHDRAWAL OF CAUTIONARY

PEMBURY LIFESTYLE GROUP LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 2013/205899/06)
(“PL Group” or “the Company”)
ISIN Code: ZAE000222949      JSE Code: PEM


PROPOSED ACQUISITION OF RETIREMENT BUSINESS AND WITHDRAWAL OF CAUTIONARY


ACQUISITION OF RETIREMENT BUSINESS
Shareholders are referred to the cautionary announcement released on 2 May 2017 regarding the
Company’s intention to acquire the business relating to six Pembury retirement lodges from entities
owned by Andrew McLachlan, a related party to PL Group. The acquisition is of the retirement business,
including current lease agreements with third parties. It does not include the purchase of the retirement
properties. The acquisition will be with effect from 1 July 2017, subject to certain conditions precedent
detailed below. The retirement business is profitable with positive cash flows and actually supported the
establishment and growth of the education business prior to the listing of PL Group. The retirement
business will be acquired by PLG Retirement Villages Proprietary Limited, a wholly owned subsidiary of
PL Group.

Transaction Consideration
The total acquisition consideration is R39 500 000. Of this amount, R7 000 000 will be settled in cash
(payable from positive cash flows generated by the group), while the remaining R32 500 000 will be
settled through the issue of 32 500 000 ordinary shares at an issue price of R1.00 per share.

Rationale for the Transaction
The acquisition of Pembury Retirement Lodges will give shareholders the opportunity to gain access to a
combined portfolio of private schooling and retirement assets, servicing two key components of society,
being school children and retirees. The retirement business is also well established and profitable, thereby
enhancing the profitability and cash flows of PL Group whilst the schools business goes through the J-
Curve. The acquisition will also serve to enhance PL Group’s annuity income as well as provide some
upside from income from the resale of life rights.

Although there are currently no listed retirement companies in South Africa, there are a number of
international examples, such as Ryman Healthcare and Summerset in New Zealand and Australia
respectively. These two companies have proven to be successful investment cases.

As life expectancy among South Africans continues to rise and the senior population numbers continue
to grow, so too does the demand for mid-, high- and village-lifestyles. With this acquisition, PL Group will
be well positioned to provide a good quality of life and appropriate care services for senior citizens, and
aims to be positioned as the leading retirement lifestyle provider in South Africa.

Business Description
The Pembury Retirement Lodges business was started in 1999 by Andrew McLachlan, the founder of PL
Group.

The first Pembury Lodge opened with only 5 residents and has grown to accommodate over 330
residents across the existing lodges. As occupancy levels increased in the current lodges, new
opportunities were identified to open lodges, mainly in the Northern suburbs of Johannesburg. This was
done by identifying and converting suitable properties to retirement lodges, which is often more cost
effective than building a new lodge.

Pembury Lodges provides elderly South African residents with fully serviced Retirement Lodges and
Healthcare. Pembury Lodges accommodate residents according to their needs, from independent living
to frail care with 24-hour nursing services.

Pembury Retirement Lodges operates five lodges in Gauteng (Melrose, Bryanston, Sandton, Fairland and
Magaliesburg) and one in the Western Cape (Plettenberg Bay). The properties are leased from third
parties or entities owned by Andrew McLachlan on an arm’s length basis.

Financial Information
The company will be acquiring the revenue and expenses of the retirement business and thus will only be
acquiring fixed assets amounting to approximately R1.5 million. Thus the balance of the purchase
consideration will be attributed to intangible assets or goodwill, amounting to around R38 million.

The profit after taxation extracted from the unaudited management accounts for the year ended
28 February 2017 was R5.5 million, noting that Pembury Sandton was only operational as a lodge for 4
months of the prior year. Thus the business is being acquired at a historical P:E of 7.1 times earnings.

Fairness opinion
The acquisition is subject to the outcome of a fairness opinion which will be compiled by a JSE-approved
Independent Expert. If the Independent Expert deems the acquisition to be unfair, then the transaction
will not proceed and will be referred back to the board.

Conditions precedent
The acquisition is subject to the following conditions precedent:

-     The terms of the acquisition being found to be fair by an independent expert, failing which the
      transaction will be referred back to the board;
-     The completion of a due diligence, with particular focus on the transferability, terms and renewal
      conditions of the leases;
-     A restraint of trade/non-compete agreement by Andrew McLachlan;
-     The payment of the cash portion will be made from positive cash flows generated by the group.

Formal legal agreements will be concluded following the conclusion of a satisfactory due diligence.

WITHDRAWAL OF CAUTIONARY
Shareholders are referred to the same cautionary announcement and are advised that the cautionary
announcement is now withdrawn.

By order of the board
Johannesburg
16 May 2017

Designated Advisor
Arbor Capital Sponsors

Date: 16/05/2017 05:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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