Acquisition of Ingen Europe BV and Withdrawal of Cautionary
Posted on: 29 November 2010
Shareholders are advised that NEPI through its wholly-owned subsidiaries NE Property Cooperatief U.A. ("NEPC") and New Europe Property N.V. ("NEP NV") (collectively, "the purchasers") has concluded an agreement for the acquisition of all the issued shares in and shareholders' claims against Ingen Europe BV ("Ingen") from Apollo Rom (US) S.a.r.l., Apollo Rom (EU) S.a.r.l., Kanebo Investments SA and Grimsby Investments S.a.r.l. (collectively, "the sellers")("the transaction").
Ingen holds 100% of the shares of Floreasca Business Park S.R.L. ("FBP") which in turn owns land and buildings (collectively, "the property" or "Floreasca Business Park") located in Bucharest, Romania.
The purchase price will be an amount of approximately EUR27.6 million ("the estimated purchase price") which will be funded through the proceeds of the rights offer ("the rights offer") further details of which were released on the Stock Exchange News Service ("SENS") of the JSE and the Regulatory News Service ("RNS") of the London Stock Exchange on 5 November 2010 and 12 November 2010.
RATIONALE FOR THE TRANSACTION
NEPI is of the view that the Bucharest office market currently offers value for investors. As a result, the management team conducted a detailed review of opportunities in the Bucharest office market that included 12 potential acquisition targets, ranked by the management team and external advisor, Colliers International, for visibility, technical quality, design, parking facilities and access to public transport. The Floreasca Business Park achieved the highest ranking of the potential acquisition targets.
The property is an A-class office building located on one of Bucharest's main boulevards with convenient access to a subway station and other means of public transport. The property benefits from 3 levels of underground parking space and its tenants include various large international corporations. The property also stands to benefit from infrastructure works currently underway in its surrounding area.
It is expected that the acquisition of the property will contribute to the growth in distributable earnings for NEPI shareholders.
SALIENT TERMS OF THE TRANSACTION
The effective date of the transaction will be the date of transfer of ownership of the shares in Ingen into the name of NEPI ("the effective date").
The final purchase price ("the final purchase price") will be determined formulaically in terms of the acquisition agreement taking into account the net operating income of the property, the indexation of rental income in January 2011 and the financial statements of Ingen and FBP as at the effective date. In so far as there is a difference between the final purchase price and the estimated purchase price an adjustment amount will be paid between the purchasers and the sellers.
The acquisition agreement contains warranties typical for acquisitions of this nature.
The transaction is not subject to any conditions precedent and is expected to close before the end of 2010.
Details of the property including the valuation, effective as at 25 October 2010 attributed to the property by the company, are as follows:
|Weighted average rental per m2 *||Rentable area *||Purchase price||Valuation|
|Floreasca Business Park||Bucharest, Romania||Office||17.21||36 032||27.6||99.8|
* These figures exclude parking spaces
The unaudited pro forma financial effects have been prepared for illustrative purposes only to provide information on how the transaction may have impacted on the historical financial results of NEPI for the six months ended 30 June 2010. Due to their nature, the unaudited pro forma financial effects may not fairly present NEPI' financial position, changes in equity, results of operations or cash flows after the transaction. The unaudited pro forma financial effects are the responsibility of the directors of NEPI. The unaudited pro forma financial effects have not been reviewed or reported on by NEPI's auditors.
The unaudited pro forma financial effects have been prepared in accordance with the accounting policies of NEPI that were used in the preparation of the unaudited interim results for the six months ended 30 June 2010.
|Before the transaction Note 1||After the transaction||Change after the transaction (%)|
|Basic weighted average earnings per share (EUR cents)||6.63||7.55||13.9|
|Diluted weighted average earnings per share (EUR cents)||6.40||7.29||13.9|
|Distributable earnings per share (EUR cents)||8.27||9.39||13.5|
|Headline earnings per share (EUR cents)||7.70||8.62||11.9|
|Diluted headline earnings per share (EUR cents)||7.44||8.33||12.0|
|Net asset value per share (EUR)||2.17||2.17||-|
|Adjusted net asset value per share (EUR)||2.15||2.14||(0.5)|
|Net tangible asset value per share (EUR)||1.99||1.90||(4.5)|
|Weighted average number of shares in issue||62 255 904||62 255 904||-|
|Diluted weighted average number of shares in issue||64 444 271||64 444 271||-|
|Number of shares in issue for net asset value and net tangible asset value per share purposes||71 268 704||71 268 704||-|
|Number of shares in issue for adjusted net asset value per share purposes||76 933 734||76 933 734||-|
Notes and assumptions
- 1. The amounts set out in the "Before the transaction" column have been extracted from the "After the rights offer" column which was set out in the rights offer declaration announcement published on SENS and RNS on 5 November 2010.
- 2. The transaction is assumed to have been implemented on 1 January 2010 for basic weighted average earnings, diluted weighted average earnings, distributable earnings, headline earnings and diluted headline earnings per share purposes and on 30 June 2010 for net asset value, adjusted net asset value and net tangible asset value per share purposes.
- 3. Ingen was acquired at the estimated purchase price of approximately EUR27.6 million, financed through the proceeds of the rights offer.
- 4. The amounts set out in the "After the transaction" column were calculated by consolidating the results of NEPI for the six months ended 30 June 2010 (after taking into account adjustments for the rights offer) and the interim accounts of Ingen and FBP for the six months ended 30 June 2010, subject to the assumptions and adjustments set out below:
- 4.1. For the six months to 30 June 2010, Ingen and FBP earned consolidated historic net rental income of approximately EUR3 million, incurred non-property related expenditure of approximately EUR0.167 million and incurred interest on external bank debt of approximately EUR1.2 million. Ingen and FBP earned a consolidated profit before tax for the six month period to 30 June 2010 of EUR1.6 million.
- 4.2. The additional distributable income which results from the transaction is assumed to be earned evenly throughout the six months ended 30 June 2010.
- 4.3. Estimated transaction costs of EUR250 000 were expensed in accordance with IFRS 3 (Business Combinations) 2008.
- 4.4. The value of the combined net assets of Ingen and FBP as at 30 June 2010 are EUR21.5 million.
- 4.5. The acquisition of Ingen together with FBP has been accounted for under IFRS 3 (Business Combinations) 2008 whereby accounts and other receivables, trade and other payables, deferred taxation and goodwill have been recognised.
- 4.6. An amount of EUR6.1 million was recognised in goodwill.
- 4.7. An amount of EUR5.6 million was recognised as a deferred taxation liability.
- 4.8. NEPI assumed external bank debt of EUR73.6 million which existed in FBP at 30 June 2010.
CATEGORISATION OF THE TRANSACTION
The transaction is a category 2 transaction in terms of section 9.5(a) of the Listings Requirements of the JSE Limited.
WITHDRAWAL OF CAUTIONARY
In accordance with the Listings Requirements of the JSE Limited, shareholders are advised that caution is no longer required to be exercised when dealing in their NEPI securities.