04 Oct - 9 min read

Category 2 Disposal Announcement

Category 2 Disposal Announcement

KAAP AGRI LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 2011/113185/06)
Share code: KAL
ISIN: ZAE000244711
(“Kaap Agri” or “the Company”)


CATEGORY 2 DISPOSAL ANNOUNCEMENT


1. INTRODUCTION

   Shareholders of the Company (“Shareholders”) are advised that on 1 October 2021, the
   Company, through its wholly-owned subsidiary, Kaap Agri Bedryf Limited (“KAB”),
   entered into an agreement (“Agreement”) with TFC Properties Proprietary Limited (“TFC
   Properties”), TFC Operations Proprietary Limited (“TFC Operations”), Empowerment
   and Transformation Investments Proprietary Limited (“ETI”), C-Max Investments 71
   Proprietary Limited (“C-Max”) and Buffdaxco 30 Proprietary Limited (“Purchaser”), in
   terms of which, inter alia, KAB will dispose of all of its shares, comprising 70,5% of the
   entire issued share in and claims against TFC Properties to the Purchaser (“Sale Equity”)
   (“Disposal”).


2. RATIONALE FOR THEDISPOSAL APPLICATION OF THE DISPOSAL CONSIDERATION
   
2.1.       The historical rationale for acquiring retail fuel and convenience properties was
           aligned with the strategic drive of footprint growth in this new market. Given that TFC
           has now successfully entered the retail fuel and convenience markets, and upon
           reviewing the returns generated on capital invested, it has been decided to dispose
           of TFC Properties, and in doing so enter into long term leases to ensure tenure on its
           fuel retail sites.

2.2.       Proceeds from the disposal of TFC properties will in the interim be used to reduce
           borrowings and provide dry powder for higher return generating acquisition
           opportunities.

3. DESCRIPTION OF TFC PROPERTIES

   TFC Properties is a property holding entity owning 21 immovable properties on which fuel
   stations with quick service restaurants and other retail tenants operate, the details of which
   are set out below (“Immovable Properties”).

4. DISPOSAL CONSIDERATION

4.1.       The enterprise value of the Company is R502 000 000 (five hundred and two million
           Rand), which is based on the fair value of the Company portfolio (“Enterprise Value”)
           equating to a disposal yield to Shareholders of 10.2%. The equity value of the
           Company is equal to the Enterprise Value of the Company less the shareholder loan
           claims of KAB which are outstanding as at the Effective Date (“Equity Value”).

4.2.       The purchase consideration payable by the Purchaser to KAB for the Sale Equity is
           the aggregate of the shareholder loans of KAB outstanding as at the Effective Date
           plus KAB’s 70.5% shareholding held in the issued share capital of the Company
           multiplied by the Equity Value (“Purchase Consideration”).

4.3.       Based on the projected shareholder loan balances as at the Effective Date the
           estimated Purchase Consideration payable to KAB taking into account its Equity
           Value and shareholder loan balance approximates to R445,603,643.

5. CONDITIONS PRECEDENT

   The Agreement is subject to the fulfilment or waiver (to the extent legally permissible) of
   conditions precedent (“Conditions Precedent”), including but not limited to:

5.1.       the boards of directors of the Company, TFC Properties, the Purchaser, C-Max and
           ETI have each approved and ratified the entering into and implementation of the
           Agreement and all agreements and transactions contemplated therein;

5.2.       the shareholders of TFC Properties have passed all the necessary special
           resolution/s to approve the transactions contemplated in the Agreement, to the extent
           applicable;

5.3.       the new lease agreements have been concluded in respect of the Sasol Properties
           (defined below), subject only to the Condition Precedent that the corresponding
           existing lease agreements expire, are cancelled or otherwise terminated;

5.4.       the Lease Agreements (defined below) have been concluded and such agreements
           have become unconditional in accordance with their terms, save for any condition
           requiring the Agreement to become unconditional;

5.5.       the Purchaser has provided to the sellers written confirmation from the Purchaser’s
           bank confirming that it has secured sufficient funding to discharge the Purchase
           Consideration;

5.6.       the Mortgage Bonds have been registered over the Immovable Properties (defined
           below) at the relevant Deeds Registries (“Mortgage Bond Registrations”);

5.7.       TFC Properties notifying the relevant regulatory authority and obtaining the prior
           written consent of counterparties to any material contracts (to the extent required), of
           the change in control of TFC Properties pursuant to the implementation of the
           Agreement; and

5.8.       the Transactions have (to the extent necessary) been unconditionally approved in
           terms of the Competition Act, 1998, or conditionally approved on terms and conditions
           acceptable to the parties to the Agreement.

6. EFFECTIVE DATE OF THE DISPOSAL

6.1.       The effective date of the Disposal will be the first day of the calendar month
           immediately following the date on which the last Condition Precedent is fulfilled or
           waived (to the extent permissible), as the case may be (“Effective Date”).

6.2.       Delivery and payment in respect of the Sale Equity will take place on the 15th
           calendar day following the Effective Date (“Closing Date”).

7. THE IMMOVABLE PROPERTIES

   Details of the fully tenanted immovable properties owned by TFC Properties (“Immovable
   Properties”) are as follows:

   Property             Geographical     Sector            Gross       Weighted
   Name and             Location                           Lettable    Average
   Address                                                 Area (m2)   Gross Rental 
                                                                       / m2
                                                                                                                                   
   Brits                North West       Fuel retail and   95,074      R3,01
   Expressmark,         Province         quick service
   R511 and R566,                        restaurant and
   Krokodildrift,                        retail
   Brits,0250

   Sasol Figtree, 1     Eastern Cape     Fuel retail and   2298        R37,15*
   William    Moffat                     quick service
   Rd, Charlo, Port                      restaurant and
   Elizabeth, 6512                       retail

   Vredenburg           Western Cape     Fuel retail and    1508        R76,45
   Expressmark                           quick service
   (Engen), 17                           restaurant and
   Saldanha Rd,                          retail
   Vredenburg,
   7380

   Kareedouw            Eastern Cape     Fuel retail and    1986        R43,68
   Expressmark, 16                       quick service
   Van Riebeeck                          restaurant and
   Str, Kareedouw,                       retail
   6400

   Modderrivier         Northern Cape    Fuel retail and    5002        R39,19
   Expressmark, 1                        quick service
   Main Road,                            restaurant and
   Modderrivier,                         retail
   8701

   Kakamas              Northern Cape    Fuel retail and    4121        R57,40
   Expressmark,                          quick service
   282                                   restaurant and
   Augrabiesweg                          retail
   Road, Kakamas,
   8870

   Danielskuil          Northern Cape    Fuel retail and    4282        R45,90
   Expressmark,                          quick service
   314 Rhode                             restaurant and
   street,                               retail
   Danielskuil,
   8405

   Britstown            Northern Cape    Fuel retail and    1902        R43,86
   Expressmark, 1                        quick    service
   Mark Street,                          restaurant and
   Britstown, 8787                       retail

   Bergrivier           Western Cape     Fuel retail and    4559        R19,34
   Expressmark, 1                        quick service
   Oosbosch                              restaurant and
   Street, Paarl,                        retail
   7646
 
   Garden route         Western Cape     Fuel retail and    22348       R7,94
   Expressmark,                          quick service
   N2 & Kurland                          restaurant and
   Rd, Kurland,                          retail
   Plettenbergbay

   Sasol Stanford       Eastern Cape     Fuel retail and    3280        R33,23*
   road, Stanford &                      quick service
   Drew Street ,                         restaurant and
   Korsten, Port                         retail
   Elizabeth, 6070

   Sasol                Eastern Cape    Fuel retail and     5480        R23,24*
   Motherwell,                          quick service
   Nzunga &                             restaurant and
   Dinanisa Street,                     retail
   Motherwell, N45,
   Port Elizabeth

   Total Clayville,     Gauteng         Fuel retail and     7809        R32,39
   Olifantsfontein &                    quick service
   Southward                            restaurant and
   Drive,                               retail
   Olifantsfontein,
   1632

   Total Summit         Gauteng         Fuel retail and     31001       R6,87
   road, 869                            quick service
   Summit rd,                           restaurant and
   Northview                            retail
   Country Estate,
   Centurion, 0157

   Engen Clayville,     Gauteng         Fuel retail and     6500        R43,83
   Olifantsfontein &                    quick service
   Southward Drive                      restaurant and
   (North),                             retail
   Olifantsfontein,
   1632

   Sasol Verbaard,      Limpopo         Fuel retail and     47645       R8,43*
   N1, Farm                             quick service
   Verbaard,                            restaurant and
   Musina, 0900                         retail

   Engen                North West      Fuel retail and     3733        R43,16
   Ventersdorp,                         quick service
   Hendrick                             restaurant and
   Potgieter &                          retail
   Carmichael St,
   Ventersdorp,
   2710

   Caltex Autostar,     Mpumalanga      Fuel retail and     2518        R55,12
   Voortrekker Rd,                      quick service
   Witbank, 1049                        restaurant and
                                        retail

   Engen Akasia         Northern Cape   Fuel retail and     2974        R103,40
   Kathu, Ben                           quick service
   Alberts Way,                         restaurant and
   Kathu, 8446                          retail

   Elegant     Fuels    Northern Cape   Fuel retail and     28091       R16,07
   Kathu, N14 &                         quick service
   Frikkie Meyer                        restaurant and
   Street, Kathu,                       retail
   8446

   Total Atlas road,    Gauteng         Fuel retail and     8222        R30,85
   Atlas Rd & Silver                    quick service
   Wings Blvd,                          restaurant and
   Parkhaven,                           retail
   Boksburg, 1459

   *Including the rental guarantee amounts referred to below

   Notes:
   The Disposal Consideration payable in respect of the Sale Equity is considered to be its
   fair market value, as determined by the directors of the Company. The directors of the
   Company are not registered as professional valuers or as professional associate valuers
   in terms of the Property Valuers Profession Act, No. 47 of 2000.

8. FINANCIAL INFORMATION

8.1.       The value of the net assets comprising the assets of TFC Properties (“Assets”) as at
           30 September 2020, being the date of the last audited consolidated annual financial
           statements, was R471 888 728.

8.2.       The audited consolidated profits after tax attributable to the Assets for the period
           ended 30 September 2020, was R3 238 262, based on the audited consolidated
           annual financial statements of the Company for the year ending 30 September 2020,
           which were prepared in terms of IFRS.

9. WARRANTIES AND OTHER SIGNIFICANT TERMS OF THE AGREEMENT

9.1.       Warranties and indemnities- The Agreement contains representations, warranties
           and indemnities by the sellers in favour of the Purchaser which are standard for a
           transaction of this nature.

9.2.       Rental Guarantee - TFC Operations has guaranteed to and in favour of the
           Purchaser a proportion of the market related monthly rental due to TFC Properties in
           respect of the four immovable properties leased by TFC Properties to Sasol (“Sasol
           Properties”) and the triple net costs payable in respect of such properties for the
           remaining duration of the leases between TFC Properties and Sasol (“Rental
           Guarantee”).

9.3.       New Lease Agreements - All pre-existing leases subsisting as at the Effective Date,
           between TFC Properties and TFC Operations will be cancelled with effect from the
           Effective Date, and replaced with new triple net lease agreements (the ‘’Lease
           Agreements’’) which will endure for 12 years from the Effective Date. TFC
           Operations, as lessee, will be entitled, at its election, to renew any one or more of the
           Lease Agreements prior to the expiry thereof. In respect of the Sasol Properties, TFC
           Properties has agreed to lease those Immovable Properties to TFC Operations on
           the expiry of those respective lease agreements on the same terms and conditions
           as the Lease Agreements.

9.4.       The aggregate annual rental, including the Rental Guarantee, payable by TFC
           Operations in respect of the Immovable Properties will be in the amount of
           R51,036,433. The rental will escalate at the higher of 1.) escalation attributable to the
           CAPEX portion of the RAS Schedule; 2.) the consumer price index, from time to time.

9.5.       In terms of the Lease Agreements, in cases where the breach relates to the non-
           payment by TFC Operations of monthly rental owing by TFC Operations under the
           lease, then should TFC Operations fail to remedy the breach within 7 business days
           of receiving written notice to do so, then TFC Properties shall be entitled (but not
           obliged), to sue for specific performance or, provided that a period of 53 business
           days has elapsed from the expiry of the 7 business day breach notice period set out
           above (“Monthly Rental Breach”), to cancel the Lease Agreement. If TFC
           Operations is in breach of rental guarantee provisions under the Agreement for a
           period of 60 business days from the date of breach, and/or TFC Operations is in
           Monthly Rental Breach in respect of a non-payment under one or more of the Lease
           Agreements, for the full period set out above, TFC Properties will be entitled (but not
           obliged) to cancel some or all of the Lease Agreements and to claim from TFC
           Operations any damages suffered by TFC Properties arising from such breach and/or
           cancellation, without prejudice to any other rights of TFC Properties.

9.6.       If TFC Properties at any time during the Lease Period wishes to sell or dispose of or
           alienate any of the Immovable Properties (including the Sasol Properties), then TFC
           Operations (or its nominee) shall have the first right of acquiring the relevant
           Immovable Properties or any one of them or the portion thereof, at the same price
           and upon the same terms and conditions as are offered to any bona fide third party.

10. CLASSIFICATION OF THE DISPOSAL

    The Disposal constitutes a category 2 transaction in terms of the JSE Limited Listings
    Requirements.

4 October 2021
Sponsor and Corporate Advisor

PSG Capital

Date: 04-10-2021 09:00:00
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