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COMBINED MOTOR HOLDINGS LIMITED - Proposed disposal of a rental enterprise in a sale and leaseback transaction

Release Date: 23/12/2020 14:05
Code(s): CMH     PDF:  
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Proposed disposal of a rental enterprise in a sale and leaseback transaction

COMBINED MOTOR HOLDINGS LIMITED
(Incorporated in the Republic of South Africa) (Registration number 1965/000270/06)
Share code: CMH
JSE ISIN: ZAE000088050
("CMH")


PROPOSED DISPOSAL OF A RENTAL ENTERPRISE IN A SALE AND LEASEBACK TRANSACTION

Introduction

CMH shareholders are hereby advised that on 22 December 2020, CMH concluded, through its subsidiary CMH
Holdings (Proprietary) Limited (the "Seller"), an agreement (the "Sale") with K202069597 (Proprietary) Limited
(the "Purchaser") in terms of which the Purchaser will acquire for a consideration of R72 million (inclusive of
VAT at a rate of zero percent), the Rental Enterprise comprising:
 -   erf 451 Randjespark ext 136 (the "Property"); and
 -   a lease agreement (the "Lease") in terms of which a subsidiary of the Seller will lease the Property on a
     triple-net basis for a period of 9 years and 11 months commencing on date of registration of the Property
     into the name of the Purchaser (the "Effective Date”), at a commencing rental of R693 011 (excluding
     VAT ) per month.

The Effective Date is anticipated to be on or about 28 February 2021.

Rationale

The Purchaser is an empowerment consortium which is 54,8% black-owned. The Property is suited to the
operations of a motor dealership and is currently occupied by a subsidiary of the Seller. The Sale, and
subsequent leaseback, of the Property seeks to further CMH's empowerment and transformation initiatives by
creating a viable and sustainable business in the hands of the Purchaser through the sale of an income-
producing asset, and the transfer of critical and specialised skills, managerial experience, and productive
capacity to the Purchaser.

The consideration and payment terms

The consideration of R72 million has been determined with reference to:
-    a valuation performed by Quadrant Properties (Proprietary) Limited, an independent professional valuer
     registered in terms of the Property Valuers Professional Act, no. 47 of 2000; and
-    the consideration paid by the Seller when it acquired the Property in terms of an arm's length transaction
     effected in May 2020.

R68,4 million of the consideration will be payable on the Effective Date. The balance of R3,6 million will be
advanced to the Purchaser as a vendor loan. The vendor loan will earn interest at the prime overdraft rate, and
the capital and interest will be repayable three years after the Effective Date. The Seller and Purchaser have
concluded a Funding Loan Agreement in this regard.

The consideration will be added to CMH's existing cash resources.

Other significant terms of the Sale

The Sale contains warranties by the Purchaser in relation to its initial and ongoing black economic
empowerment credentials, such warrants being for a minimum of 3 years after the Effective Date.

The Property is sold "voetstoots".

Financial information

The value of the Property is R72 million, which is the consideration paid by the Seller when it acquired the
Property in May 2020. Consequently, there will be no profit nor loss made on the disposal of the Property.
The Property will become revenue-generating in the hands of the Purchaser from the Effective Date.
Categorisation of the Sale
The Sale will be effective on the Effective Date and constitutes a Category 2 Transaction in terms of the JSE
Limited Listings Requirements.


Durban
23 December 2020

Sponsor
PricewaterhouseCoopers Corporate Finance (Proprietary) Limited

Date: 23-12-2020 02:05:00
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