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Lease Renewal Agreements with a Related Party
Value Group Limited
(Incorporated in the Republic of South Africa)
(Registration number 1997/002203/06)
Share code: VLE ISIN: ZAE000016507
(“Value Group” or “the company”)
LEASE RENEWAL AGREEMENTS WITH A RELATED PARTY
1. INTRODUCTION AND RATIONALE
Value Group provides integrated logistics services throughout South Africa. These
services are conducted by utilising its premises comprising warehousing, distribution and
depot infrastructure, which are crucial elements in respect of the performance of its
operations.
Shareholders are advised that due to the termination and expiration of existing leases
Value Group has, through its wholly-owned subsidiary, Value Logistics Limited, entered
into separate indivisible lease renewal agreements in respect of immovable properties with
property companies represented by Mr. Steven Gottschalk, a director and material
shareholder of Value Group (“the Lease Renewal Agreements” and “the Corporate
Action”). Details of the Lease Renewal Agreements and the terms and conditions to which
implementation of the Corporate Action is subject are set out in paragraphs 2, 3 and 5 of
this announcement.
The Lease Renewal Agreements are in respect of properties to be specifically utilised as
critical infrastructure for the provision of services to material clients under warehousing
and distribution services-agreements with durations aligned to those of the Lease Renewal
Agreements. The obligations arising from the Lease Renewal Agreements are accordingly
underpinned by the cash flows to be realised from the said third-party client agreements.
Lease rental rates have been determined with reference to an assessment performed by a
JSE approved independent valuer.
2. THE LEASE RENEWAL AGREEMENTS
In terms of the Lease Renewal Agreements, and on implementation of the Corporate
Action, the company will enter into triple nett leases in respect of the following properties:
2.1 Clayville Property:
Related party property owning company: Future Indefinite Investments 180 (Pty
Ltd
Property description: Portion 14 of Erf 1250 Clayville,
Extension 14, Johannesburg,
Registration Division J.R., Ekurhuleni
Metropolitan Municipality
Nature of lease: Renewal of expired lease
Lease commencement date: 1 April 2020
Lease expiring date: 31 March 2023
Lease period: 3 years
Monthly rental (excluding VAT): R1,480,000 (for the first year)
Annual escalation in second year of lease: 6.5%
Re-evaluation of market rentals and annual Rentals commencing 1 April 2022.
escalations:
2.2 Joostenbergvlakte Property:
Related party property owning company: Lougot Property Investments (Pty Ltd
Property description: Portion 477 of the Farm 728
Joostenbergvlakte, Registration
division Paarl RD, Western Cape
Province, City of Cape Town
Nature of lease: Renewal of expired lease
Lease commencement date: 1 April 2020
Lease expiring date: 31 March 2023
Lease period: 3 years
Monthly rental (excluding VAT): R649,351 (for the first year)
Annual escalation in second year of lease: 7%
Re-evaluation of market rentals and annual Rentals commencing 1 April 2022.
escalations:
2.3 Pomona Property:
Related party property owning company: 471 Church Street (Pty Ltd
Property description: Erf 3072 Pomona Extension 114 (6-
278 EP Malan Road, Pomona)
Nature of lease: Renewal of expired lease
Lease commencement date: 1 July 2020
Lease expiring date: 30 June 2023
Lease period: 3 years
Monthly rental (excluding VAT): R546,000 (for the first year)
Annual escalation in second year of lease: 6.5%
Re-evaluation of market rentals and annual Rentals commencing 1 July 2022.
escalations:
3. RELATED PARTY TRANSACTION AND CONDITION PRECEDENT
As the Lease Renewal Agreements have been concluded with companies associated with
Mr. Steven Gottschalk, a director and material shareholder of the company, and the
aggregated rentals payable on implementation of the Corporate Action will exceed 5% of
the market capitalisation of Value Group, the Corporate Action is classified as a related
party transaction in terms of the Listings Requirements of the Johannesburg Stock
Exchange (“the JSE”).
The Corporate Action therefore requires shareholder approval at a general meeting and
the issue of a fairness opinion by an Independent Professional Expert approved by the
JSE (“the IPE”) on the terms and conditions of the Corporate Action.
Mazars Corporate Finance Proprietary Limited has been appointed by the company as the
IPE, and its opinion on the Corporate Action will be included in the circular to shareholders
referred to in paragraph 5 below.
4. PRO FORMA FINANCIAL EFFECTS OF THE CORPORATE ACTION
The table below sets out the pro forma financial effects of the Corporate Action on the
company’s earnings per share, headline earnings per share, net asset value per share and
tangible net asset value per share based on the most recently published financial results of
the company for the six months ended 31 August 2019. The financial effects are the
responsibility of the directors of the company, are prepared for illustrative purposes only
and, because of their nature, may not fairly present the financial position of the company,
changes in its equity or the results of its operations or cash flows after the Corporate
Action.
Before(1) After(2&3) % change
Earnings per share (cents) 30.8 27.5 (10.7%)
Headline earnings per share (cents) 31.8 28.5 (10.4%)
Diluted earnings per share (cents) 28.8 25.8 (10.4%)
Diluted headline earnings per share (cents) 29.7 26.7 (10.1%)
Net asset value (cents) 521.1 523.0 0.4%
Net tangible asset value (cents) 499.5 501.5 0.4%
Number of shares in issue ('000) 172,635 172,635 -
Weighted number of shares in issue ('000) 142,907 142,907 -
Diluted number of shares in issue ('000) 152,656 152,656 -
Notes:
(1) Extracted from the unaudited financial results of Value Group for the six months ended 31 August 2019.
(2) For purposes of Earnings, Headline Earnings, Diluted Earnings and Diluted Headline Earnings per share, the amounts
in the After column have been calculated on the assumption that the Lease Renewal Agreements had been effective
on 1 March 2019 and the expiring leases had expired on that date. Relevant calculations have been performed in
accordance with the provisions of IFRS 16: Leases.
Transaction costs associated with the Corporate Action have been expensed.
(3) For purposes of calculating pro forma net asset value per share and tangible net asset value per share it has been
assumed that the Corporate Action was effective on 31 August 2019.
5. CIRCULAR TO SHAREHOLDERS
A circular to shareholders convening a general meeting at which the resolutions required
to implement the Corporate Action will be proposed is being prepared and will, subject to
the approval of the JSE, be dispatched to shareholders in due course.
By order of the board
Johannesburg
29 May 2020
Sponsor Auditors and reporting Independent Professional Corporate
accountants Expert advisor
Investec SVG. Mazars Corporate Finance Suez Capital
Bank
Date: 29-05-2020 12:53:00
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