TIDMISH
RNS Number : 4347Y
Ishaan Real Estate PLC
21 February 2013
21 February 2013
Ishaan Real Estate Plc ("Ishaan Real Estate" or the
"Company)
Proposals for the sale of the Company's entire Property
Interests and the amendment of the Company's investment strategy to
facilitate the subsequent distribution of the Company's Estimated
Net Cash Resources (estimated at 51 pence per Ordinary Share) to
Shareholders
The Independent Committee of Ishaan Real Estate announces today
the proposed sale of the Company's entire Property Interests,
subject to Shareholder approval and other conditions, to Chalet
Hotels Private Limited ("Chalet"), a member of the K Raheja Corp
Group, and other entities connected with K Raheja Corp Group, for
an aggregate consideration of approximately GBP70.3 million in cash
(the "Disposal"). In the event that Shareholders approve the
proposed Disposal and completion of the Disposal occurs, the
Independent Committee intends to distribute to Shareholders the
Group's Estimated Net Cash Resources (estimated at 51 pence per
Ordinary Share) to Shareholders as soon as practically
possible.
The Disposal constitutes a "related party transaction" under
Rule 13 of the AIM Rules and also a "disposal resulting in a
fundamental change of business" under Rule 15 of the AIM Rules. In
accordance with the requirements of Rule 15 of the AIM Rules,
completion of the Disposal is conditional, inter alia, on approval
by Shareholders.
A circular (the "Circular") explaining the background to and
reasons for the proposed Disposal and containing a notice convening
an extraordinary general meeting at which the required resolutions
to approve the Disposal and to implement the processes necessary to
facilitate the subsequent distribution of the Group's Estimated Net
Cash Resources to Shareholders will be considered will be posted to
Shareholders shortly. A copy of the Circular will be made available
on the Company's website: www.ishaanrealestate.com.
Deutsche Bank is acting as nominated adviser and broker to
Ishaan Real Estate in relation to the Disposal. Rothschild is
acting as financial adviser to Chalet Hotels Private Limited in
relation to the Disposal.
The following text has been extracted from the letter from the
Chairman of Ishaan Real Estate plc to be set out in Part 1 of the
Circular (the "Letter"). Terms defined in the Letter are set out in
Appendix 1 to this announcement.
1. Introduction
As Ishaan Real Estate has made progress in the development of
the Projects held through its Property Interests, the Board has
evaluated a number of options to realise cash from the Company's
assets and to return this cash to Shareholders. Simultaneously,
while there have been a number of views expressed by Shareholders
as to the strategic direction the Company should take, a number of
significant Shareholders (other than the K Raheja Entities) holding
in aggregate a majority of the Company's Ordinary Shares have
requested that any opportunity to realise cash in the near term
through an orderly process should be progressed.
On 11 December 2012, as part of the Company's interim report for
the six month period ended 30 September 2012, the Board reiterated
this focus on the disposal of assets and the return of cash to
Shareholders. This statement highlighted that the Board remained
committed to pursuing all options to realise cash for Shareholders
and would look to advance any disposal process in an orderly
manner.
On 15 February 2012, the Company announced that it was in
advanced discussions in relation to the disposal of the Group's
entire Property Interests to entities associated with K Raheja
which, if concluded, would allow for a cash distribution of 51
pence per Ordinary Share to Shareholders through a subsequent
members' voluntary winding up of the Company.
The Independent Board Committee has now received a binding
proposal from Chalet, a member of the K Raheja Group, and other K
Raheja Entities to acquire all of Ishaan's Property Interests (the
"Disposal") for an aggregate consideration of approximately GBP70.3
million. As set out in more detail in Section 4 below, the
Independent Board Committee has decided, after careful
consideration, to pursue the Disposal and is accordingly seeking to
implement the processes necessary to complete the Disposal. In the
event that Shareholders approve the Disposal and completion of the
Disposal occurs, it is the Board's intention to distribute all of
the Estimated Net Cash Resources to Shareholders as soon as
practically possible. The Total Shareholder Distribution is
expected to be approximately 51 pence per Ordinary Share. A second
extraordinary general meeting will be required in due course to
seek Shareholder approval for the members' voluntary winding up and
cancellation of the Company's admission to trading on AIM. As such,
the amounts of the Initial Distribution and Final Distribution may
be affected by variables which are wholly or partly outside of the
control of the Company including, but not limited to, the factors
mentioned in Section 7 below.
Members of the Group have therefore entered into conditional
agreements with the Purchasers to effect the Disposal, conditional
on Shareholder approval and the obtaining of a nil withholding tax
certificate from the Indian tax authorities. Under Rule 15 of the
AIM Rules, the Disposal constitutes a disposal resulting in a
fundamental change of business and therefore requires approval from
Shareholders representing at least 50 per cent. of the votes cast
at an extraordinary general meeting. Under Rule 13 of the AIM
Rules, the Disposal also constitutes a related party transaction
because the Purchasers are connected with Neel Raheja, a Director
of the Company, and the Investment Adviser.
The Company has received indications from certain Shareholders
(including those Directors who are Shareholders and the K Raheja
Entities) that it is their intention to vote in favour of the
Resolutions. These Shareholders hold in aggregate 79,682,743
Ordinary Shares, representing approximately 54.63 per cent. of the
Company's current issued share capital.
A description of the Property Interests which are the subject of
the Disposal will be provided in Part 2 of the Circular. In the 12
month period ended 31 March 2012, the Company generated a
comprehensive loss of GBP10.1 million and in the six month period
ended 30 September 2012, the Company generated a comprehensive
profit of GBP0.4 million. The Property Interests were held at a
value of GBP94.4 million as at 30 September 2012. Save as disclosed
elsewhere in this announcement, the Board believes that there has
been no significant change in the financial position of the Company
since the release of the Company's results for the six month period
ended 30 September 2012 on 11 December 2012.
The purpose of this announcement is to provide Shareholders:
-- with the background to, and rationale for the Disposal;
-- to explain why the Independent Board Committee has decided to pursue the Disposal;
-- to inform Shareholders of the Total Shareholder Distribution
expected to be made following the Disposal; and
-- to provide details of the forthcoming Extraordinary General
Meeting to approve the Disposal and to amend the Company's
investment strategy, further details of which are set out in this
announcement.
If the Resolutions as set out in the Notice of Extraordinary
General Meeting are passed, the completion of the Disposal is
expected to take place by 28 March 2013, subject to the timing of
the satisfaction of the conditions precedent (see Section 2
below).
2. Summary of the Disposal
The Disposal will be effected by way of the Purchasers acquiring
the Group's entire Property Interests for an aggregate
consideration of approximately GBP70.3 million in cash.
Under the terms of the Share Purchase Agreements, the Purchasers
will acquire the Group's:
-- 40 per cent. share of the entire issued ordinary share
capital (and 100 per cent. of the entire issued preference share
capital, where applicable) of each of (i) Trion Properties Private
Limited; (ii) Serene Properties Private Limited; (iii) Magna
Warehousing & Distribution Private Limited; (iv) Genext
Hardware and Parks Private Limited; and (v) Newfound Properties and
Leasing Private Limited; and
-- 38.98 per cent. share of the entire issued ordinary share
capital (and 100 per cent. of the entire issued preference share
capital, where applicable) of each of (i) Sundew Properties
Limited; and (ii) Intime Properties Limited.
The Disposal, after allowing for all costs associated with the
Disposal and the estimated Winding Up Costs, is expected to leave
the Company with Estimated Net Cash Resources of approximately
GBP74.5 million.
In the event that Shareholders approve the Disposal and
completion of the Disposal occurs, the Board intends to distribute
to Shareholders the Estimated Net Cash Resources as soon as
practically possible. The Total Shareholder Distribution is
expected to be approximately 51 pence per Ordinary Share,
comprising an Initial Distribution of 50 pence per Ordinary Share,
expected to be paid to Shareholders in May 2013, and a Final
Distribution of approximately 1 pence per Ordinary Share, expected
to be paid to Shareholders on the conclusion of the intended
members' voluntary winding up of the Company. The timing and amount
of the Initial Distribution and the Final Distribution are subject
to a number of factors set out in Section 7 below.
The implied Total Shareholder Distribution represents:
-- a discount of approximately 33.7 per cent. to the Adjusted
NAV of 76.9 pence per Ordinary Share as at 30 September 2012;
-- a premium of approximately 31.6 per cent. to the closing
mid-market price per Ordinary Share of 38.75 pence on 14 February
2013 (being the last business day prior to the Company's
announcement that it was in advanced discussions in relation to the
disposal of the Group's entire Property Interests); and
-- a premium of approximately 57.4 per cent. to the volume
weighted average closing mid-market price per Ordinary Share of
32.4 pence over the six month period ended 14 February 2013.
Further details on the calculation of the Estimated Net Cash
Resources and the implied Total Shareholder Distribution are set
out in Section 6 below. Further details on the tax implications of
the receipt of the Total Shareholder Distribution are set out in
Section 12 below.
The Disposal is conditional upon the obtaining of a nil
withholding tax certificate from the Indian tax authorities
confirming that no withholding tax is required to be deducted at
source in relation to the consideration payable to the Group for
the sale of the Property Interests. The Board has been advised that
this condition precedent to the Disposal is expected to be
satisfied by 28 March 2013. However, there can be no assurance that
the obtaining of a nil withholding tax certificate from the Indian
tax authorities will be obtained in the anticipated timeframe, or
at all. If the Indian tax authorities deem that withholding tax on
the Disposal is payable, the Share Purchase Agreements impose an
obligation upon the parties to use their reasonable endeavours to
renegotiate, for a period of 30 days, the terms of the Share
Purchase Agreements.
The Disposal is also conditional upon Shareholder approval.
Unless the parties agree otherwise in writing, if this condition
precedent under the Share Purchase Agreements is not satisfied by
28 March 2013 the Share Purchase Agreements will lapse and the
Disposal will not proceed.
The Purchasers, and certain of their associated entities, have
agreed to certain restrictions on their ability to dispose, or
commit to dispose, of any assets of or interests in the Projects
for a period of 12 months following completion of the Disposal, as
will be further detailed in Part 3 of the Circular.
In consideration of the provision of information and assistance
to be rendered by the Investment Adviser in connection with the
members' voluntary winding up of the Company and the deregistration
of Mauritian Holdco and the Mauritian SPVs, any surplus cash
remaining in the Company after payment by the Company's liquidator
of all costs associated with the Disposal and the Winding Up Costs,
and conditional on the Company achieving a Total Shareholder
Distribution of 51 pence per Ordinary Share, will be distributed by
the Company's liquidator to the Investment Adviser upon completion
of the members' voluntary winding up.
The principal terms of the Transaction Documents under which the
Disposal will be effected will be set out in Part 3 of the
Circular.
It is important to note that, whilst each of the Purchasers have
provided assurance that they will have access to sufficient
resources to acquire the Property Interests, the purchase
consideration is not held in escrow. As such, the Group is reliant
on the Purchasers paying the purchase consideration upon completion
of the Disposal. In the event that the conditions precedent to
completion under the Share Purchase Agreements are satisfied, but
the Purchasers do not pay the purchase consideration, the
Purchasers are liable to pay in aggregate a GBP3,500,000 break fee.
However, payment of the break fee requires exchange control
approval under Indian law, and therefore the receipt of such
payment is dependent on achieving this approval. The provisions
relating to the break fee payment will be detailed further in Part
3 of the Circular.
It is also important to note that certain other provisions under
the Transaction Documents may be difficult to enforce under Indian
law and may be subject to additional regulatory approval including
exchange control. These include the non-disposal undertakings by
the Purchasers and certain of their associated entities and any
payment by the Purchasers under the Tax Indemnities, as will be
further detailed in Part 3 of the Circular.
3. Investment strategy following the Disposal
If the Disposal is approved by Shareholders and the Group
completes its disposal of the Property Interests, the Group's
operations will effectively cease. A second resolution will
therefore also be proposed at the Extraordinary General Meeting in
order to amend the Company's investment strategy so that it becomes
the proposed members' voluntary winding up of the Company.
The Directors intend that, if Shareholders vote in favour of the
Disposal and the amendment of the investment strategy, a subsequent
extraordinary general meeting of the Company will be called
following the completion of the Disposal in order to seek
Shareholder approval for the members' voluntary winding up of the
Company (including the Total Shareholder Distribution) and the rest
of the Group in accordance with applicable law, and the
cancellation of the admission of the Ordinary Shares to trading on
AIM. The resolutions to approve the members' voluntary winding up
of the Company and to cancel the admission of the Ordinary Shares
to trading on AIM would both require 75 per cent. of the
Shareholders attending and voting at the subsequent extraordinary
general meeting to vote in favour.
4. Background to and reasons for the Disposal
The decision by the Independent Board Committee to pursue the
Disposal has been taken after a review of the Group's strategic
alternatives to the Disposal. The Independent Board Committee has
in particular considered alternative strategies to realise cash for
Shareholders and the time frame in which any such realisations may
be achievable, considering the potential for the disposal of the
Project Interests in the near term and the returns that might be
achievable through waiting for the Projects to reach a more
complete stage of development.
In deciding to pursue the Disposal, the Independent Board
Committee has assessed the value of the proposal from the
Purchasers against the Group's reported Adjusted NAV of 76.9 pence
per Ordinary Share as at 31 September 2012 primarily on the
following factors:
-- The Group will continue to incur investment advisory costs
and administrative expenses pending completion of any disposal
process: Group costs incurred directly within Ishaan Real Estate
totalled GBP3.6 million in the year ended 31 March 2012 and GBP4.0
million in the year ended 31 March 2011. The Board expects to
continue to incur similar levels of costs within Ishaan Real Estate
absent any significant disposals. An appraisal of the present value
of these costs has been taken into account in assessing the
Disposal against the alternative of an asset by asset disposal
process over the longer term.
-- The challenge of releasing cash from the Vivarea project:
Whilst approximately 90 per cent. of the residential space
currently under construction in connection with the first phase at
the Vivarea project has been pre-sold (as at 30 September 2012) and
the relevant Indian Investment Vehicle has partially recognised
profits on the same since the year ended 31 March 2011, the sale of
the remaining area of the first phase of the Vivarea project is not
expected to be completed until the financial year ending 31 March
2014, and as such, recognition of the total profit for this phase
of the Vivarea project is not expected to be concluded until the
end of the financial year ending 31 March 2014. In the near term,
the relevant Indian Investment Vehicle wishes to conserve part of
the cash surplus to fund the approval and construction cost of the
second phase. In view of the above, the Independent Board Committee
only expects a dividend to be distributed from the Vivarea project
during the years ending 31 March 2014 and 2015. Any dividend
payable will also likely be subject to a distribution tax.
-- Limited interest from third party purchasers in acquiring the
minority interests available in the Projects at the current time:
Ishaan Real Estate has only limited rights as a minority investor
in each of the assets comprising the Property Interests, with K
Raheja entities exercising control in each project. The Board has
made enquiries of K Raheja as to its interest in selling, in
conjunction with the Group, a 100 per cent. interest in certain of
the Projects, but given current market conditions, K Raheja has
expressed limited interest to Ishaan Real Estate in disposing of
its majority interests in the Projects. In addition, the obligation
for the relevant K Raheja entity to sell up to 10 per cent. of the
equity, in an individual Project where the Company has identified a
third party willing to purchase 50 per cent. of a Project, only
provides the ability to deliver joint control of a Project and is
only enforceable six months after the completion of a Project. With
completion timelines for five Projects extending to 2014 and
beyond, this right has limited impact on the Company's ability to
dispose of Projects at the current time.
As a consequence, and as shown by the pre-marketing process
described in more detail below, there are a limited number of
potential investors interested in acquiring such minority interests
and any sale, even on an individual property basis, is likely to
require a substantial discount against its appraised value to
reflect minority ownership and be subject to an extended
negotiation process, including extensive representations and
warranties.
Outcome of the pre-marketing of the Company's Property
Interests
During the second half of 2012, Mauritian Holdco appointed Jones
Lang LaSalle to market the Company's Property Interests to
determine interest in acquiring assets both on a whole portfolio
basis and in respect of individual assets.
Jones Lang LaSalle prepared an information memorandum that was
confidentially shared with a number of potential third party
purchasers (both Indian and international), identified as having a
significant existing or future interest in investing in Indian real
estate. Jones Lang LaSalle obtained preliminary feedback on the
terms under which these investors would be prepared to acquire the
Company's Property Interests, either on a portfolio or asset by
asset basis. In particular, feedback was obtained, at varying
levels of detail, in the following areas:
-- their interest in the whole Property Interests or selected assets;
-- preliminary pricing expectations;
-- the issues and conditionality in connection with any potential purchases; and
-- the envisaged time frame to complete a transaction.
This pre-marketing process identified the following points
relevant to the Independent Board Committee's consideration of the
Disposal:
-- The level of interest in the Projects: Interest was expressed
in certain Projects, particularly those assets at or nearing
completion. However, some of the investors highlighted that, even
for the Property Interests in Projects at or nearing completion,
they would expect a reasonable level of discount to gross asset
value;
-- The timeframe to complete an asset by asset disposal process
for the Property Interests: Whilst it may be possible for certain
Property Interests to be sold within a twelve month time frame,
completion of an asset by asset disposal process could take several
years to complete, primarily to allow for completion of the
development of the Projects;
-- There is a limited pool of investors interested in a
'portfolio' acquisition: Little value was attributed to any asset
that did not meet an individual investor's investment criteria (in
particular the interests held by the Group in the greenfield
projects at Juinagar and Pocharam); and
-- Potential investors raised a number of structural and
governance concerns in respect of the Property Interests available
for them to purchase:
o The Group's limited rights as a minority investor in the
Property Interests, including a lack of control;
o The ability to achieve an exit in the future;
o The availability of drag rights to move to a joint control
position where Projects were not completed;
o The insufficiency of drag rights to achieve joint control in
respect of the Intime and Sundew projects, in which the Group's
interest has been diluted to 38.98 per cent., following the
restoration of APIIC's 11 per cent. shareholding in these project
vehicles;
o The need for any intercompany loans to be replaced ahead of
individual asset sales, where certain Projects have been financed
through intercompany loans between project vehicles; and
o The potential for ongoing dispute between K Raheja and APIIC
complicating any transaction for assets located in Hyderabad.
Given this response to the pre-marketing process, the
Independent Board Committee believes at the current time pursuing a
disposal process with third party purchasers would be unlikely to
deliver superior value to Shareholders in comparison to the
Disposal.
Benefits of the Disposal
A number of significant Shareholders (excluding K Raheja
Entities), holding in aggregate a majority of the Company's
Ordinary Shares, have expressed views that any opportunity to
realise cash in the near term through an orderly process should be
explored.
The Independent Board Committee believes that the Disposal has
the following principal benefits:
-- The Disposal is a 'portfolio' deal which provides the
opportunity to realise immediate value from all of the Company's
Property Interests, and provides Shareholders with liquidity from
their investment in the Company. The expected Total Shareholder
Distribution represents a significant premium to the closing
mid-market price per Ordinary Share of 38.75 pence on 14 February
2013 (being the last business day prior to the Company's
announcement that it was in advanced discussions in relation to the
disposal of the Group's entire Property Interests), albeit that it
also represents a substantial discount to the Adjusted NAV per
Ordinary Share as at 30 September 2012.
-- This immediate realisation of value should be compared
against a much longer expected timeframe for any individual asset
disposal process (and the additional execution risk such an
alternative strategy would entail). Similarly, at the current time,
the Independent Board Committee believes that a 'portfolio' deal
with a third party purchaser is likely to require a similar or
greater level of discount to the Adjusted NAV, will carry a
significant level of execution risk and is likely to require an
extended period to reach completion.
-- The Disposal is subject to limited conditionality and due
diligence and contractual protection is therefore substantially
lower than alternative disposal strategies. The Share Purchase
Agreements only contain warranties from the Mauritian SPVs
concerning capacity and title to the shares of the Indian
Investment Vehicles (and no warranties as to the underlying
Projects) which means fewer residual liabilities are expected to
arise for the Group. Finally, there is no requirement for any
amount of the Disposal proceeds to be placed into escrow to support
any of the representations or warranties made by the Mauritian SPVs
as part of the disposal process.
Accordingly, the Independent Board Committee believes that the
Disposal would represent a cleaner break than a disposal to a third
party other than the Purchasers and that the Disposal will allow
Ishaan Real Estate to return funds to Shareholders faster than on a
corresponding disposal to a third party other than K Raheja
Entities.
Further considerations
The Independent Board Committee has also taken into account the
following factors in considering the Disposal:
-- The Company's shares have persistently traded at a
significant discount to Adjusted NAV:As at 14 February 2013 (being
the last business day prior to the Company's announcement that it
was in advanced discussions in relation to the disposal of the
Group's entire Property Interests) the Company's shares traded at a
discount of approximately 49.6 per cent. to the Adjusted NAV of
76.9 pence per Ordinary Share as at 30 September 2012, and have
traded at an average discount of approximately 56.0 per cent. to
the last reported Adjusted NAV over the 12 month period to 14
February 2013. Combined with the lack of trading liquidity
described below, for a considerable period of time there has been
little prospect of an improvement in the Company's share price
absent an expectation of a significant cash return per Ordinary
Share, which the Disposal is expected to provide.
-- There is a lack of liquidity in the Company's Ordinary
Shares: There is only limited liquidity in the trading of the
Company's Ordinary Shares, reflecting the Company's reduced market
capitalisation and the Company's tightly held share register. This
lack of liquidity causes even small transactions in the Ordinary
Shares potentially to result in large price movements.
-- Foreign exchange impacts on the reported Sterling value of
the Company's investments:The value of the Company's Property
Interests in Sterling is impacted by the movement in the exchange
rate of the Rupee. The reported value of the Company's Property
Interests as at 28 September 2012 were impacted by negative
movement in the exchange rate of the Rupee from INR 81.80 on 30
March 2012 to INR 85.71 on 28 September 2012. The exchange rate of
the Rupee against Sterling has been volatile since 28 September
2012, weakening to a low of INR 89.54 on 21 December 2012, although
it has recently recovered and, as at 20 February 2013, stood at INR
83.45.
-- The Indian economic outlook: Gross Domestic Product (GDP)
growth rates in India remain below the Government of India's target
GDP growth rate of 8 per cent. (it was reported as 5 per cent. for
the first quarter of 2013), albeit that the Government of India
recently announced a series of measures to stimulate long-term
economic growth and reduce fiscal deficits, including the opening
up of the retail sector to FDI and the injection of liquidity into
the Indian financial system. While the long-term prospects for
economic growth in India remain attractive, in the short term the
economy is expected to remain below the Government of India's
target GDP growth rate.
-- The Indian real estate market: Occupier demand for commercial
space in India continues to be impacted by the slowdown in global
and domestic economic activity. Residential volumes in Mumbai have
been affected by high property prices and weakening affordability.
While it is likely that there will be an improvement in valuations
over the medium term and increased investment demand as confidence
in India increases and financing becomes more widely available,
there remains uncertainty as to when any such improvements may
occur.
-- Development status of the projects in the Property Interests:
There has been continued progress in letting activity within the
projects in the Property Portfolio. As at 30 September 2012,
approximately 77 per cent. of the lettable area constructed or
under construction in non-residential projects in the Property
Portfolio was let or pre-sold. Approximately 90 per cent. of the
area under construction at the Vivarea project was pre-sold as at
30 September 2012.
However, construction costs continue to be negatively impacted
by inflation and the average rental levels currently being achieved
in the commercial projects are approximately Rs. 35 per square foot
per month of chargeable area. Timelines to complete the projects in
the Property Portfolio have continued to require extension and
occupier demand has been negatively impacted by delays in the
completion of major infrastructure projects and the slowdown in
Indian economic growth.
Conclusion
Taking account of all of the above, the Independent Board
Committee believes that it is in the best interests of Shareholders
to proceed with the Disposal and Shareholders should be afforded an
opportunity to consider and vote on the Disposal. While ultimately
it may be possible to realise a higher level of cash proceeds for
Shareholders through an asset by asset disposal strategy over the
longer term, there remains uncertainty:
-- that the proceeds achievable would materially exceed the net
present value of estimated Total Shareholder Distribution
achievable as a result of the Disposal; or
-- over the timeframe within which such disposals could be achieved.
5. Mechanics of the distributions and the de-registration /
winding up processes of the Mauritian companies and the Company,
and the cancellation of the Company's admission to trading on
AIM
The Mauritian companies
Once the Mauritian SPVs have received the proceeds of the
Disposal from the Purchasers, the Mauritian SPVs will repay any
outstanding intercompany loans due to the Mauritian Holdco, clear
their residual net liabilities, if any, and will then distribute
the net resulting proceeds to Mauritian Holdco. Mauritian Holdco
will then repay any outstanding intercompany loans due to the
Company, clear their residual net liabilities, if any, and will
then distribute the net resulting proceeds to the Company. This
process is expected to take one to two weeks following receipt by
the Mauritian SPVs of the proceeds of the Disposal.
The Mauritian SPVs and Mauritian Holdco will then notify the
Financial Services Commission in Mauritius that they have ceased to
carry on global business and are seeking de-registration. Mauritian
Holdco and the Mauritian SPVs will also need to notify the
Mauritian Revenue Authority of their intention to de-register, and
will need to seek confirmation from both the Mauritian Revenue
Authority and Financial Services Commission that they have no
objection to such de-registration. There is then a 40 day public
notice period that needs to be met before application forms for
de-registration can be submitted to the Registrar for Companies.
The Registrar of Companies will only process the application for
de-registration after confirmation of non-objection to such
de-registration from the Financial Services Commission and the
Mauritius Revenue Authority. It is expected that the
de-registration process of Mauritian Holdco and the Mauritian SPVs
could take up to three months from the date that the application is
submitted to the Registrar of Companies.
The Company
The members' voluntary winding up of the Company which will
follow the completion of the Disposal will be initiated by separate
statutory declarations made by Directors of the Company to the
effect that they have made a full inquiry into the affairs of the
Company and that having done so they have formed the opinion that
the Company will be able to pay its debts in full within a period
not exceeding twelve months from the commencement of the members'
voluntary winding up. The Directors will then convene a further
extraordinary general meeting of the Company to seek Shareholder
approval for the members' voluntary winding up in accordance with
the applicable laws. The resolution to approve the members'
voluntary winding up is a special resolution requiring a majority
of not less than 75 per cent. of the votes cast at the
extraordinary general meeting. If the resolution is passed by the
requisite majority, the members' voluntary winding up will commence
immediately. The liquidator appointed by the Shareholders at the
extraordinary general meeting will undertake the process of payment
of creditors and collection and distribution of the Company's
assets and, once this is complete, make up a final account. He must
then call a further extraordinary general meeting of the Company to
lay the account before the Shareholders; and, within one week of
the final extraordinary general meeting, send to the Registrar of
Companies a copy of the account together with a final return for
registration. On the expiration of three months from the date of
registration of the return, the Company is deemed to be
dissolved.
The Directors consider that it is not in the interests of
Shareholders that the Company continues to incur the costs
associated with maintaining the admission of the Ordinary Shares to
trading on AIM while the Company completes the members' voluntary
winding up process.
Under the AIM Rules, it is a requirement that the cancellation
of admission to trading on AIM must be approved by not less than 75
per cent. of votes cast by Shareholders in an extraordinary general
meeting. Accordingly, the Directors will propose a further special
resolution at the extraordinary general meeting called in
connection with the members' voluntary winding up to approve the
application to the London Stock Exchange for cancellation of the
Company's admission to trading on AIM. The special resolution will
be conditional upon the special resolution for members' voluntary
winding-up of the Company being passed.
In any event, under the Isle of Man Companies Act 1931, any
transfer of shares, not being a transfer made to or with the
sanction of the liquidator and any alteration in the status of the
Shareholders, made after the commencement of the members' voluntary
winding up, would be void. As such, Shareholders should be aware
that trading in the Ordinary Shares on AIM will be suspended from
7.00 am on the date of the further extraordinary general meeting,
details of which will be circulated in due course, if
appropriate.
No provision will be made for trading in the Ordinary Shares
following cancellation to trading on AIM and the Ordinary Shares
will not be transferable once the Company enters liquidation.
6. Calculation of the Estimated Net Cash Resources and the
implied Total Shareholder Distribution
The estimated amounts of the Estimated Net Cash Resources and
the implied Total Shareholder Distribution have been calculated as
follows:
GBP million Pence per
Ordinary Share
------------------------------------- ------------ ----------------
Proposed transaction consideration 70.3 48.1
------------------------------------- ------------ ----------------
Other current assets of the Company
------------------------------------- ------------ ----------------
Cash and short term deposits 7.8 5.3
------------------------------------- ------------ ----------------
Trade and other receivables 0.0 0.0
------------------------------------- ------------ ----------------
Other current liabilities of the
Company
------------------------------------- ------------ ----------------
Trade and other payables (1.0) (0.7)
------------------------------------- ------------ ----------------
Costs of the Disposal (1.0) (0.7)
------------------------------------- ------------ ----------------
Retention for estimated Winding Up
Costs (1.6) (1.1)
------------------------------------- ------------ ----------------
Estimated Net Cash Resources 74.5 51.0
------------------------------------- ------------ ----------------
Initial Distribution 73.1 50.0
------------------------------------- ------------ ----------------
Final Distribution 1.5 1.0
------------------------------------- ------------ ----------------
Total Shareholder Distribution 74.5 51.0
------------------------------------- ------------ ----------------
Notes:
1. Unaudited
2. Assumes 146,110,450 Ordinary Shares in issue based on
145,854,133 Ordinary Shares in issue as at the date of this
announcement and 256,317 Ordinary Shares to be issued pursuant to
the exercise of share options held by the Directors as described in
Section 10 below.
3. The implied Total Shareholder Distribution as set out above
is an estimate based on the information available to the Board as
at the date of this announcement and is based on a number of
assumptions and estimates. As such, the amounts of the Initial
Distribution and Final Distribution may be affected by variables
which are wholly or partly outside of the control of the Company,
including but not limited to the factors mentioned in Section 7
below.
7. Factors affecting the timing and amount of the Initial
Distribution and the Final Distribution
The Company is a holding company which makes investments in FDI
compliant projects in India through Mauritian Holdco, an
intermediate holding company which invests in wholly owned
Mauritian subsidiaries (the Mauritian SPVs).
The Group and the Indian Investment Vehicles are subject to the
laws and rules and regulations of India, Mauritius and the Isle of
Man, including local company laws, exchange controls and other
regulations. The ability of Ishaan Real Estate to pay the Initial
Distribution and the Final Distribution and the timing of such
payments are therefore subject to variables and risk factors which
are wholly or partly outside the control of Ishaan Real Estate.
These include, but are not limited to:
-- Shareholders approving the members' voluntary winding up of
the Company at the second extraordinary general meeting;
-- differences between estimated costs and actual costs;
-- the duration of the process to de-register the Mauritian SPVs
and the Mauritian Holdco prior to the final liquidation of the
Company;
-- a requirement by the directors of the Mauritian SPVs to
increase the allowance for de-registration costs in respect of any
unforeseen liabilities;
-- any requirement by the Company's liquidator to increase the
Winding Up Costs allowance in respect of any unforeseen Group
liabilities;
-- any changes to tax laws in India, Mauritius or the Isle of
Man after the date of this announcement;
-- the imposition of exchange controls in India on the proceeds of the Disposal;
-- the imposition or retention of tax by the Indian tax
authorities on the proceeds of the Disposal notwithstanding the
obtaining of a nil withholding tax certificate;
-- the Company, the Mauritian Holdco or the Mauritian SPVs being
deemed to be tax resident in countries other than their country of
incorporation; and
-- any differences that may emerge between the unaudited pro
forma balance sheet information presented in Section 6 and the
audited financial information used to complete the members'
voluntary winding up process.
8. Termination of the Investment Advisory Agreement
Conditional upon completion of the Disposal, the Investment
Advisory Agreement between Mauritian Holdco and the Investment
Adviser will automatically terminate in accordance with the terms
of the Termination Agreement.
Under the Termination Agreement, an advisory fee will continue
to be payable to the Investment Adviser until the earlier of 28
March 2013 or completion of the Disposal under the Share Purchase
Agreements. No performance fee will be due to the Investment
Adviser in connection with the Disposal.
In consideration of the provision of information and assistance
to be rendered by the Investment Adviser in connection with the
members' voluntary winding up of the Company and the deregistration
of Mauritian Holdco and the Mauritian SPVs, any surplus cash
remaining in the Company after payment by the Company's liquidator
of all costs associated with the Disposal and the Winding Up Costs,
and conditional on the Company achieving a Total Shareholder
Distribution of 51 pence per Ordinary Share, will be distributed by
the Company's liquidator to the Investment Adviser upon completion
of the members' voluntary winding up.
9. K Raheja Entities' holdings of Ordinary Shares
As at the date of this announcement, K Raheja Entities held
7,493,811 Ordinary Shares, representing approximately 5.14 per
cent. of the existing issued share capital of the Company. As such,
they will receive a pro rata share of any Total Shareholder
Distribution.
In addition, the Board understands that the K Raheja Entities
intend to vote in favour of the Resolutions at the Extraordinary
General Meeting as they are permitted to do under the AIM
Rules.
10. Exercise of Directors' options
Certain Directors who are entitled to exercise share options
which accrued in 2011 / 2012 in lieu of Directors' salaries intend
to exercise those options following the announcement of the results
of the Extraordinary General Meeting. The Directors entitled to
exercise such share options and the number of Ordinary Shares to
which they are entitled is as follows:
-- Mr Stephen Vernon: 71,377 Ordinary Shares;
-- Mr Ian Henderson: 105,680 Ordinary Shares; and
-- Mr Vittorio Radice: 79,260 Ordinary Shares.
The aforementioned Directors are also entitled to exercise share
options in lieu of salary for the 2012 / 2013 period, but have
agreed to waive such entitlement in exchange for a pro rated cash
award as satisfaction of such share options instead.
11. Related Party Transaction under Rule 13 of the AIM Rules
Under Rule 13 of the AIM Rules, the Disposal constitutes a
related party transaction. Chalet is a related party to the Company
by virtue of it being a company of the K Raheja Group. In addition,
Mr Neel Raheja, a director of the Company, is also a director of
Chalet and other K Raheja Entities.
The Independent Board Committee of the Company (which excludes
Mr Neel Raheja, who, given his relationship with the K Raheja Group
as described above, did not participate in the Board's
deliberations on this point) consider, having consulted with
Deutsche Bank, the Company's nominated adviser, that the terms of
the Disposal are fair and reasonable insofar as Shareholders are
concerned.
12. Taxation
Shareholders should seek their own advice on the tax
implications of the receipt of the Total Shareholder Distribution.
The following information is general information based on the law
and practice currently in force in the United Kingdom. Investors
should note that tax law and interpretation can change.
It is the intention of the Board that both the Initial
Distribution and the Final Distribution will be made by the Company
in cash through a members' voluntary winding up of the Company. For
Shareholders in the UK, the receipt of each of the Initial
Distributions and Final Distribution should, under current tax law,
give rise to a capital gain or a capital loss (depending on the
cost to each Shareholder of their Ordinary Shares).
Shareholders who are resident in the United Kingdom for tax
purposes may be liable to capital gains tax (for individuals) or
corporation tax (for companies) in respect of capital gains
realised on the Total Shareholder Distribution which will be deemed
in the case of the Initial Distribution to be a partial disposal of
their shareholding. Individual Shareholders are entitled to an
annual exemption from capital gains. For the 2012/13 tax year this
is GBP10,600. Shareholders within the charge to corporation tax may
claim indexation allowances to reduce any chargeable gain arising
on the disposal of the Ordinary Shares. Any capital losses realised
may, in certain circumstances, be available for offset against
other capital gains.
Shareholders who, together with connected parties, own more than
10 per cent. of the Company should be aware that under section 13
of the Taxation of Chargeable Gains Act 1992, capital gains
realised by the Company or its subsidiaries could be apportioned to
UK resident Shareholders. (It should be noted that the draft
Finance Bill 2013 amends the 10 per cent. limit to 25 per cent. for
disposals made on or after 6 April 2012, and as such this higher
percentage will apply subject to the Finance Bill being enacted in
its current form).
Non-UK domiciled individual Shareholders (who are resident and
ordinarily resident in the UK) who are being taxed on a remittance
basis will only be liable to UK capital gains tax to the extent
that any gains are remitted to the UK. Non-UK domiciled individual
Shareholders who are not taxed on a remittance basis will be taxed
as for other UK resident individuals.
13. Voting intentions
The Company has received undertakings from the Directors who are
Shareholders to vote in favour of the Resolutions at the
Extraordinary General Meeting in respect of their beneficial
holdings of Ordinary Shares amounting, in aggregate, to 1,900,156
Ordinary Shares representing approximately 1.30 per cent. of the
existing issued share capital of the Company.
The Company has also received undertakings from certain other
Shareholders to vote in favour of the Resolutions at the
Extraordinary General Meeting in respect of their beneficial
holdings of Ordinary Shares amounting, in aggregate, to 70,288,776
Ordinary Shares, representing approximately 48.19 per cent. of the
existing issued share capital of the Company.
In addition, the Board understands that the K Raheja Entities
intend to vote in favour of the Resolutions at the Extraordinary
General Meeting, as they are permitted to do under the AIM Rules,
in respect of their holdings of 7,493,811 Ordinary Shares,
representing approximately 5.14 per cent. of the existing issued
share capital of the Company .
In aggregate, therefore, the Company has received undertakings
or is aware of intentions to vote in favour of the Resolutions at
the Extraordinary General Meeting in respect of a total of
79,682,743 Ordinary Shares, representing approximately 54.63 per
cent. of the existing issued share capital of the Company.
14. Extraordinary General Meeting
Shareholders will find at the end of the Circular a notice
convening an Extraordinary General Meeting of the Company, to be
held at Top Floor, 14 Athol Street, Douglas, Isle of Man IM1 1JA at
12.00 pm on 11 March 2013.
At the Extraordinary General Meeting, the Resolutions will be
proposed to approve (a) the sale of the Property Interests to the
Purchasers and (b) the Company's revised investment strategy.
15. Action to be taken
The Circular explaining the background to and reasons for the
proposed Disposal and containing a notice convening the
Extraordinary General Meeting at which Resolutions will be
considered will be posted to Shareholders shortly.
Shareholders will find enclosed with the Circular a Form of
Proxy for use at the Extraordinary General Meeting.
16. Recommendation
The Independent Board Committee, taking into account the factors
set out in this announcement, conclude that the Disposal and the
amendment to the Company's investment strategy are in the best
interests of the Company and its Shareholders. Accordingly, the
Independent Board Committee unanimously recommends that
Shareholders vote in favour of the Resolutions.
Enquiries:
Deutsche Bank AG, London Branch (NOMAD and broker to the Company)
Ben Lawrence
John O'Driscoll
Tel: +44 20 7545 8000
College Hill (PR advisers to
the Company)
Mike Davies
Tel : +44 20 7457 2020
Email: mike.davies@collegehill.com
Rothschild (Financial adviser
to Chalet Hotels Private Limited)
Alex Midgen
Robert Waddingham
Tel: +44 20 7280 5000
Deutsche Bank AG is authorised under German Banking Law
(competent authority: BaFin - Federal Financial Supervising
Authority) and authorised and subject to limited by the Financial
Services Authority. Details about the extent of Deutsche Bank AG's
authorisation and regulation by the FSA are available on
request.
Deutsche Bank AG is acting for the Company and no one else in
connection with the Disposal and will not be responsible to anyone
other than the Company for providing the protections afforded to
clients of Deutsche Bank nor for providing advice in connection
with the Disposal.
Rothschild is acting as financial adviser to Chalet Hotels
Private Limited and is acting for no one else in connection with
the Disposal and will not be responsible to anyone other than
Chalet Hotels Private Limited for providing the protections
afforded to customers of Rothschild nor for providing advice in
connection with the Disposal or the contents of this document or
any other matter referred to herein.
APPENDIX 1
DEFINITIONS
The following definitions apply throughout this announcement,
unless otherwise stated or unless the context requires
otherwise:
"Adjusted NAV" the net asset value of the Company adjusted
to include all investments at the latest valuations
in proportion to the Group's shareholdings
and a provision for a potential income tax
liability in respect of the Vivarea project,
but excluding the impact of the deferred tax
provision arising on valuation surpluses on
the net assets of the Company.
"AIM" the market of that name operated by the London
Stock Exchange
"AIM Rules" the AIM Rules for Companies published by the
London Stock Exchange from time to time
"APIIC" Andhra Pradesh Industrial Infrastructure Corporation
Ltd
"Board" or the the directors or the board of directors, as
"Directors" the case may be, of the Company from time to
time
"Chalet" Chalet Hotels Private Limited, a member of
the K Raheja group
"Company" or "Ishaan Ishaan Real Estate plc, a company incorporated
Real Estate" and registered in the Isle of Man with registered
number 117470C
"Deutsche Bank" Deutsche Bank AG, London Branch
"Disposal" the proposed disposal of the Company's Property
Interests in accordance with the terms of the
relevant Transaction Documents
"Estimated Net the estimated net cash available to the Company
Cash Resources" following the Disposal after deducting all
costs associated with the Disposal and the
estimated Winding Up Costs
"Extraordinary the extraordinary general meeting of the Company
General Meeting" to be convened for 12.00 pm on 11 March 2013
to consider the Resolutions
"FDI" foreign direct investment
"Final Distribution" the proposed distribution described in Section
2 of this announcement
"Form of Proxy" the form of proxy to accompany the Circular
for use at the Extraordinary General Meeting
"FSA" or "Financial Financial Services Authority of England and
Services Authority" Wales and its successors
"FSMA" Financial Services and Markets Act 2000, as
amended of England and Wales
"Genext" Genext Hardware and Parks Private Limited
"Group" the Company and its subsidiary undertakings
from time to time which for the avoidance of
doubt does not include the Indian Investment
Vehicles
"Independent Board a committee of the Board comprising all the
Committee" Directors other than Neel Raheja
"Indian Investment the investment vehicles (Trion, Serene, Magna,
Vehicles" Genext, Newfound, Sundew and Intime) incorporated
in India which carry out the development of
the nine Projects and in which the Group holds
ordinary and (if applicable) preference shares
"Initial Distribution" the proposed distribution as described in Section
2 of this announcement
"Intime" Intime Properties Limited
"Investment Adviser" Neerav Investment Advisory Services (Dubai)
Limited
"Investment Advisory the agreement between I Holding Company (Mauritius)
Agreement" Ltd and Neerav Investment Advisory Services
(Cyprus) Private Limited dated 6 November 2006,
as amended
"Ishaan Real Estate" see "Company"
"K Raheja" K Raheja Corp
"K Raheja Entities" C. L. Raheja, Jyoti C. Raheja, Ravi Raheja,
Neel Raheja, each of their respective spouses
and their respective lineal descendants and
each of the companies or partnerships or any
other entity in which C. L. Raheja, Jyoti Raheja,
Ravi Raheja, Neel Raheja, any of their respective
spouses and/ or any of their respective lineal
descendants directly and/or indirectly hold
in the aggregate more than 50 per cent. of
the paid up equity share capital/capital of
such company or other entity and/or also control
such company or other entity
"London Stock London Stock Exchange plc
Exchange"
"Magna" Magna Warehousing & Distribution Private Limited
"Mauritian Holdco" I Holding Company (Mauritius) Ltd
"Mauritian SPVs" the wholly owned subsidiaries of Mauritian
Holdco, which are as follows: I-1 Company (Mauritius)
Limited ("I-1"); I-2 Company (Mauritius) Limited
("I-2"); I-4 Company (Mauritius) Limited ("I-4");
I-6 Company (Mauritius) Limited ("I-6"); I-7
Company (Mauritius) Limited ("I-7"), and will
be further detailed in Part 2 of the Circular
"NAV" net asset value
"Newfound" Newfound Properties and Leasing Private Limited
"Notice" the notice of the Extraordinary General Meeting
to be set out at the end of the Circular
"Ordinary Shares" ordinary shares of GBP0.01 each in the capital
of the Company
"Projects" the FDI-eligible Indian real estate investment
development projects in which the Company invests
from time to time, with each one being a "Project"
"Property Interests" the Group's equity and preference stakes (as
specified in Section 2 of this announcement)
in the nine Projects which are being developed
by the Indian Investment Vehicles
"Property Portfolio" the investments in the nine Projects which
comprise the Property Interests
"Purchasers" Chalet Hotels Private Limited and / or, as
the case may be, certain other K Raheja Entities
"Resolutions" the resolutions to be proposed to Shareholders
at the Extraordinary General Meeting, the text
of which will be set out in the Notice
"Rothschild" N M Rothschild & Sons Limited, incorporated
in England and Wales with registered number
925279 and regulated by the Financial Services
Authority in the United Kingdom with reference
number 124451
"Rupees" or "Rs." the lawful currency of the Republic of India
or "INR"
"Serene" Serene Properties Private Limited
"Share Purchase the five conditional agreements dated 21 February
Agreements" 2013 and made between the relevant Mauritian
SPV, the relevant Indian Investment Vehicle
and the relevant Purchasers in relation to
the Disposal
"Shareholder" a registered holder of Ordinary Shares
"Sundew" Sundew Properties Limited
"Tax Indemnities" the tax indemnities dated 21 February 2013
from the Purchasers in favour of the Mauritian
SPVs and their directors in connection with
sale of the Property Interests
"Termination Agreement" the termination agreement dated 21 February
2013 between Mauritian Holdco, the Company
and the Investment Adviser in respect of the
Investment Advisory Agreement
"Total Shareholder the Initial Distribution together with the
Distribution" Final Distribution
"Transaction Documents" the Share Purchase Agreements, the Wrap Agreement,
the Tax Indemnities and the Termination Agreement
"Trion" Trion Properties Private Limited
"United Kingdom" the United Kingdom of Great Britain and Northern
or "UK" Ireland
"Winding Up Costs" all costs expected to be incurred in connection
with the proposed members' voluntary winding
up of the Group and any residual costs of the
Group's operations
"Wrap Agreement" the agreement dated 21 February 2013 in furtherance
of the Share Purchase Agreements entered into
between the Company, the Purchasers, certain
other K Raheja Entities, the Mauritian SPVs,
the Mauritian Holdco and the Indian Investment
Vehicles
"GBP" or "GBP" the lawful currency of the UK and the Isle
or "Sterling" of Man
or "pence"
This information is provided by RNS
The company news service from the London Stock Exchange
END
MSCPGUWAPUPWGQG
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