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MAS REAL ESTATE INC - Acquisition of Prime Kapital CEE Property Investment Management Limited and related interests

Release Date: 05/09/2019 13:32
Code(s): MSP     PDF:  
 
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Acquisition of Prime Kapital CEE Property Investment Management Limited and related interests

MAS Real Estate Inc.
Registered in the British Virgin Islands
Registration number 1750199
SEDOL (EMTF): B96VLJ5
SEDOL (JSE): B96TSD2
JSE share code: MSP
ISIN: VGG5884M1041
LEI code: 213800T1TZPGQ7HS4Q13
("MAS" or "the Company")


ACQUISITION OF PRIME KAPITAL CEE PROPERTY INVESTMENT MANAGEMENT LIMITED AND RELATED INTERESTS                             


INTRODUCTION

Further to the announcement on 28 August 2019, the board of directors of MAS (the "Board") is pleased to advise
shareholders that MAS has entered into an agreement with Prime Kapital Limited ("PK") to purchase PK's effective
economic interest in PKM CEE Investments Limited (the "Investment JV"), comprising an effective 20%
participation in the Investment JV less the interest cost on the participation funding that is provided by MAS,
together with the PK group's property management platform which provides management services in respect of
the real estate investment property portfolio of the Investment JV (the "Transaction"). In addition, Martin Slabbert
and Victor Semionov will be appointed as the Chief Executive Officer and Chief Operating Officer of MAS,
respectively, for a period of three years, as detailed below.

MAS currently has an effective interest in the Investment JV equivalent to an 80% direct participation in the
performance of the Investment JV and a 20% participation at the weighted average cost of external funding
achieved by the Investment JV.

The property management platform to be acquired includes all of the human resources, systems, processes,
intellectual property and contracts which are utilised in the management of the real estate investment properties
held by the Investment JV and are required to provide the services envisaged in the Investment JV.

RATIONALE FOR THE TRANSACTION

The Transaction is consistent with MAS' strategy to increase its geographical focus in the higher growth Central
and Eastern Europe ("CEE") markets, with a predominant focus on retail, together with integrating the capability
to manage and grow its own assets by providing MAS with:
    - additional exposure to the portfolio of income-generating CEE retail properties held by the Investment JV;
    - the necessary human resources, systems, processes and intellectual property to manage the assets in
       the Investment JV without reliance on third parties;
    - an experienced management team that is well known to MAS with a proven track record of delivery in the
       CEE markets and strong alignment of interests with MAS; and
    - continued exposure to development opportunities in CEE through its investment in PKM Developments
       Limited, the development joint venture established with PK in March 2016, which is unaffected by the
       Transaction.

MAS reaffirms its prospects as set out in its consolidated annual financial statements for the year ended 30 June
2019 released on SENS earlier today.

Ron Spencer, chairman of the Board, commented: "We are convinced that our strategy of continuing to expand
into CEE markets, and divest out of Western Europe, is the most appropriate strategy for the group. We are
therefore delighted to be able to acquire PK’s interest in the investment joint venture, together with the PK property
management platform. This allows strong momentum to continue as we divest out of our slower growth Western
European markets. Martin and Victor are well respected and highly experienced with proven track records in CEE.
We look forward to them joining the Company and the Board to take MAS forward."

THE TRANSACTION

Salient terms

Subject to the fulfilment or waiver (as applicable) of the conditions precedent set out below and with effect from
the Completion Date (defined below) or such subsequent date on which the Transaction completes:
    -   PK will sell and transfer to the MAS group all the shares in Prime Kapital CEE Property Investment
        Management Limited ("PK Manco") (or otherwise enter into arrangements for the termination, or transfer
        to MAS, of the net economic benefits that PK Manco enjoys pursuant to the Investment JV);
    -   all members of the PK group (other than PK Manco) which hold loans or profit sharing loans in the
        Investment JV will transfer to the MAS group all such loans; and
    -   the applicable entities within the PK group which house the components comprising the PK property
        management platform will (i) transfer to the MAS group all its rights, title and interests in and to their
        property management platform assets; as well as (ii) transfer to the MAS group the relevant employees
        employed by them (or make such other arrangements as have a similar effect).

Transaction completion will take place on and the Transaction will be commercially effective from the date
("Completion Date") which falls five business days after the date of fulfilment or waiver (if applicable) of the
conditions precedent set out below or on such later date as may be agreed between MAS and PK.

The consideration payable by MAS to PK in terms of the Transaction is 67 million MAS shares ("Consideration
Shares") which will be issued by MAS to PK on the Completion Date.

PK has undertaken to MAS that it will not during a period of three years commencing on the Closing Date ("Lock-
In Period") transfer any interest in the Consideration Shares to another person.

PK, in consultation with MAS, will identify key individuals that are employees of or service providers to the property
management platform and will allocate to them 5% of the Consideration Shares.

Given that MAS is already invested in the Investment JV and has had a level of involvement in the activities of PK
Manco and the property managememt platform, the agreement in respect of the Transaction contains only such
limited undertakings and warranties as MAS considered necessary and appropriate.

Conditions precedent

The Transaction is subject to the fulfilment or (to the extent possible at law) waiver of the following conditions
precedent:

    -   all applicable corporate authorisations, including board and shareholder approval (it being agreed that the
        requirements applicable to related party transactions as envisaged in section 10.4 of the JSE Listings
        Requirements will be complied with in relation to the Transaction);
    -   all applicable regulatory consents, including the approval of the Transaction by any applicable competition
        law authority;
    -   the reconstitution of the Board (as described below) (and each of MAS' subsidiaries, if applicable);
    -   MAS (i) maintaining the listing of its securities on the Johannesburg Stock Exchange and trading in its
        shares is not suspended at the Closing Date; and (ii) is not exposed to circumstances that may reasonably
        be expected to have a material adverse effect on the liquidity of trading in, or the value of, those shares
        (excluding for this purpose any transaction, merger, combination, corporate action or circumstance
        relating to the Transaction); (ii) has not announced that it is in the process of merging or combining its
        business with another company or is in the process of undertaking any other corporate action that implies
        a change in the strategy described in "Rationale for the transaction" paragraph above;
    -   the consent of any third party where required; and
    -   such other conditions precedent as the parties may agree.

Reconstitution of the Board

Subject to compliance with the JSE Listings Requirements and the Luxembourg Stock Exchange Rules and
Regulations, MAS will procure that the Board is reconstituted as follows:

    -   Martin Slabbert is appointed as Chief Executive Officer and Victor Semionov as Chief Operating Officer
        of MAS for the duration of the Lock-In Period, in replacement of incumbent officers;
    -   a qualified individual nominated by PK is appointed (A) as director and Chief Financial Officer of MAS
        and the MAS group; and
    -   the existing Chairman retires.

In addition, two reputable and suitably qualified independent non-executive directors will be appointed to the
Board of directors within a reasonable time.

The appointments of Martin Slabbert and Victor Semionov will be on the basis that no remuneration is payable to
either of them by MAS during the aforesaid period of their appointment.

If required by MAS on expiry of the Lock-In Period, Martin Slabbert will be appointed to the Board as Chairman
or non-executive director for a further period of three years.
FINANCIAL INFORMATION

During the year ended 30 June 2019, PK received a dividend of €1,930,742 in relation to its participation in the
Investment JV. PK's share of net profit after tax (non-controlling interest) for the year ended 30 June 2019
amounted to €6,496,289 and its share of the net assets at 30 June 2019 is €7,092,714.

This information has been extracted from MAS's audited consolidated annual financial statements for the year
ended 30 June 2019 prepared in accordance with International Financial Reporting Standards as issued by the
International Accounting Standards Board , the JSE Listings Requirements, the Rules and Regulations of the
Luxembourg Stock Exchange and applicable legal and regulatory requirements of the BVI Business Companies
Act 2004.

CATEGORISATION

The Transaction constitutes a Category 2 transaction for MAS in terms of section 9 of the JSE Listings
Requirements. As MAS and PK have agreed that the requirements applicable to related party transactions as
envisaged in section 10.4 of the JSE Listings Requirements will be complied with in relation to the Transaction,
the Transaction is required to be approved by MAS shareholders (excluding PK and its associates) by way of an
ordinary resolution. The notice convening the general meeting, the fairness opinion to be prepared by an
independent expert to be appointed by MAS, as well as a statement of the Board as to whether the Transaction
is fair insofar as shareholders of MAS are concerned will be included in a circular which will be issued to
shareholders in due course.

This announcement is made in accordance with article 17 of Regulation (EU) No 596/2014 of the European
Parliament and of the Council of 16 April 2014 on market abuse (market abuse regulation) and repealing Directive
2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC
and 2004/72/EC (the "MAR") and contains inside information as defined in the MAR. The person responsible for
making this notification on behalf of the Company is Ron Spencer, chairman of the Board.

MAS is listed on the Main Board of the JSE and is listed and admitted to trading on the Euro MTF market of the
Luxembourg Stock Exchange.


5 September 2019 (13:30 SAST)

For further information please contact:
Sarah King, Acting Company Secretary, MAS Real Estate Inc.                       +44 1624 625000
Java Capital, South African Corporate Advisor and JSE Sponsor                    +27 11 722 3050
Harneys Luxembourg, Luxembourg Stock Exchange Listing Agent                      +352 278 671 02
Investor Relations, Lizelle du Toit                                              +27 82 465 1244

Date: 05/09/2019 01:32:00
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