TIDMMPO
RNS Number : 2312G
Macau Property Opportunities Fund
28 February 2018
28 February 2018
Macau Property Opportunities Fund Limited
("MPO" or the "Company")
Proposed Disposal of Senado Square Project and Notice of General
Meeting
Further to its announcement of 3 February 2018, the Board of MPO
announces that it has today posted to Shareholders a circular (the
"Circular") setting out the terms of the conditional disposal of
the Company's Senado Square retail development project (the
"Disposal") and giving notice of a General Meeting at which
Shareholder approval will be sought for the Disposal.
The Circular, which contains the notice convening the General
Meeting to be held at 12.00 p.m. on Monday, 19 March 2018 at
Lefebvre Place, Lefebvre Street, St. Peter Port, Guernsey GY1 4HY,
has today been posted to MPO Shareholders, together with the Form
of Proxy, for voting on the resolution to implement the Disposal
being proposed at the General Meeting.
The Circular has also been submitted to the National Storage
Mechanism where it will shortly be available for inspection at
www.morningstar.co.uk/uk/NSM. In addition, the Circular will be
available to view on at the registered office of the Company,
Heritage Hall, Le Marchant Street, St. Peter Port, Guernsey during
usual business hours on any weekday (Saturdays, Sundays and public
holidays excepted) from the date of this Circular up to and
including the date of the General Meeting and at the place of the
General Meeting for at least 15 minutes before and during the
General Meeting. Defined terms used in this announcement shall have
the same meaning as ascribed to them in the Circular.
The Appendix to this announcement sets out an extraction of the
letter from the Chairman contained in the Circular without
amendment together with an expected timetable of principal
events.
For further information:
Company Registration Number 44813
Website: www.mpofund.com
Manager
Sniper Capital Limited
Doris Boo
Tel: +65 6222 1440
Email: doris.boo@snipercapital.com
Corporate Broker
Liberum Capital
Richard Crawley / Richard Bootle / Jonathan Wilkes-Green / Henry
Freeman
Tel: +44 20 3100 2222
Company Secretary & Administrator
Estera International Fund Managers (Guernsey) Limited
Kevin Smith
Tel: +44 14 8174 2742
Stock Code:
London Stock Exchange: MPO
LEI
213800NOAO11OWIMLR72
APPIX
Letter from the Chairman of MPO
The following is an extract from the letter from Chairman
contained in the Circular without amendment.
"Dear Shareholder
1. Introduction
Further to the announcement made on 3 February 2018, I am
writing to you to give you further details of the conditional
disposal of the Company's interests in the Senado Square Project
(the Disposal) for a total consideration of HK$800 million (c.
US$102.3 million) (the Purchase Price). The Purchase Price will be
satisfied in cash. The Senado Square Project is held through a
special purpose company within the Company's Group (the Target
Company) and the sale will be effected through the sale of the
entire issued share capital of the Target Company, along with
certain Shareholder Loans.
The Purchase Price represents a premium of approximately 14 per
cent. to the Senado Square Project's valuation of HK$703 million
(c. US$89.9 million) as at 31 January 2018 and a gain of 541 per
cent. over the acquisition cost of US$16.0 million in October 2007.
This translates to a return on investment of 469 per cent. and an
internal rate of return (IRR) of 20 per cent. For the 12 month
period ended 30 June 2017, no profits were attributed to the Senado
Square Project given it is and remains a development asset.
The buyers are Ardent Success Limited and City Universe Limited
(together, the Buyer).
Under the terms of a promissory agreement of assignment of
shares and shareholder loans (Promissory Transfer Agreement),
entered into by certain subsidiaries of the Company, the Group has
received a deposit totalling HK$15 million (c. US$1.9 million) (the
Deposit), representing c. 1.9 per cent. of the agreed Purchase
Price, and will (subject to Shareholder approval at the General
Meeting) receive a further HK$785 million (c. US$100.3 million),
representing 98.1 per cent. of the agreed Purchase Price, on
Completion of the Disposal, which is expected to occur on or before
29 March 2018 (subject to Shareholder approval of the Disposal
having first been received).
HK$80 million (c. US$10.2 million), representing 10 per cent. of
the agreed Purchase Price, will be pledged as a bank guarantee for
a period of six months after Completion. This will be released to
the Company thereafter, provided that no past debts, taxes or
miscellaneous fees and payments arise during the six- month
period.
This Circular provides you with more information concerning the
Disposal, the terms of the Promissory Transfer Agreement and
related documentation in connection with the Disposal, together
with the Resolution of Shareholders necessary to effect the
Disposal.
2. Background to and reasons for the Disposal
At the Company's annual general meeting in November 2016,
Shareholders were asked to vote on whether the Company should be
discontinued in the form it was originally constituted.
My letter in the 2016 Circular explained that after 24 months of
decline:
"... the pace of Macau's economic slowdown is easing and the
gaming industry, the driver of Macau's economy, is stabilising ...
The extension of the Company's life will allow flexibility for the
Company to take advantage of the expected recovery and afford the
potential to realise the full value of its property portfolio
rather than undertake a realisation of the Company's assets at
potentially lower valuations in the event the life of the Company
was not extended beyond 2016."
Shareholders voted against the discontinuation in order to allow
flexibility for the Manager to realise value from the Company's
real estate portfolio. The Shareholders resolved at the meeting
that, going forward, the Company would hold an annual vote as to
whether to continue the Company (the first of which will take place
in November 2018).
In the interests of realising value for Shareholders, the
Manager has (both before and after the November 2016 vote) engaged
with agents and held discussions with a number of parties which had
expressed interest in acquiring some or all of the Company's real
estate portfolio.
While the Company has had some success in disposing of smaller
assets, particularly within the last 12 months, the divestment of
higher-value assets has proven more challenging. Demand from
mainland Chinese investors - previously key participants in the
Macau market - has been subdued, largely due to tight scrutiny by
China's central government of capital outflows and outbound
property investment. Macau's own anti-speculation policies have
also curbed investors' purchasing power.
My statement accompanying the annual report and accounts to 30
June 2017 commented:
"Today, Macau's prospects are looking much brighter. Gaming
revenue has rebounded for 13 consecutive months, returning the
economy to growth. In tandem, property values have begun to
recover. ... Having navigated through the downturn, our overriding
focus is now on realising asset values into the recovery. With this
in mind, the Board is continuing to assess all forms of potential
divestment options that might benefit shareholders."
Since 30 June 2017 the economic recovery in Macau has continued.
Gaming revenue increased by 19.1 per cent. for the year to 31
December 2017 and gross domestic product increased by 6.1 per cent.
year on year for the third quarter of 2017. Looking ahead, Macau's
economy should benefit in 2018 from the completion of some large
infrastructure projects, most notably the 30 kilometre Hong
Kong-Zhuhai- Macau bridge, the opening of two more large integrated
casino resorts and Beijing's aim to assist Macau to diversify its
economy and become a top-ranked tourist destination as expressed in
the Chinese government's 13th Five-Year Plan. This should support
the continued steady, if gradual, improvement in both sentiment and
property prices which should facilitate further divestment of the
Company's portfolio. Risks do however remain to Macau's recovery
including the Chinese central government's ongoing efforts to curb
outbound capital flows.
In accordance with the Company's accounting policies, the Senado
Square Project is classified within Inventories in the Company's
balance sheet for the period ended 30 June 2017. The Senado Square
Project is carried at the lower of cost and net realisable value,
which equated to US$17.3 million. This is reflected in the pro
forma statement of net assets set out in Part 4 of this Circular on
page 18. The valuation of the property as at 30 June 2017 (the date
of the last published audited numbers) was US$84.8 million, and the
valuation as at 31 January 2018 was US$89.9 million. The better
outlook for Macau's economy (as described in the paragraph above)
has been the contributing factor that has led to the higher
valuation as at 31 January 2018.
The total Purchase Price payable under the Disposal of the
Senado Square Project represents an approximate 14 per cent.
premium to the 31 January 2018 valuation, offering a significant
premium to current valuation and to all previous offers. The offer
also represents a gain on cost since October 2007 of 541 per cent.
which translates to an IRR of 20 per cent. Having acquired the
property in 2007, secured vacant possession, consolidated
ownership, achieved architectural planning consents and now
approaching development stage, many of the development hurdles have
been overcome and the Manager has already achieved much of the
value creation for this project. A sale at this time will therefore
capture the vast majority of the targeted IRR, while at the same
time removing the development risk associated with completing the
Senado Square Project.
Furthermore, the opportunity to realise cash on a large
proportion of the Company's portfolio secures the financial
position of the Company and its ability to negotiate further
divestment from a position of strength, to repay debt and to return
cash to Shareholders as soon as is reasonably practicable.
Due to size of the Disposal, the Disposal constitutes a Class 1
transaction for the purposes of the Listing Rules. Accordingly, as
required by the Listing Rules, an ordinary resolution approving the
Disposal will be proposed to Shareholders at the General Meeting
and the Completion of the Disposal will be conditional on the
passing of this Resolution. All Shareholders will be able to vote
on this resolution.
A summary of certain possible risks associated with the Disposal
is set out in Part 2 of this Circular. The proposed Resolution to
approve the Disposal is set out in the Notice of General Meeting at
the end of this document.
3. Information on the Senado Square Project and the Target Company
The Senado Square Project is the Company's flagship retail
development, strategically located in the UNESCO-listed heritage
district of downtown Macau. This redevelopment project is in the
advanced planning phase and has been designed by internationally
renowned architecture firm, Arquitectonica. The proposed
contemporary, iconic design will have a gross floor area of 67,800
square feet of prime retail floor space and will, upon completion,
offer a brand new shopping and dining experience catering to both
locals and tourists. The Senado Square Project comprises a
development site (excluding a basement level) situated at Travessa
do Roquete N 11, Rua da Se N s 9 - 11 in Sé, Macau.
The real estate assets comprised in the Senado Square Project
were valued at HK$703 million (c. US$89.9 million) as at 31 January
2018 and are held through the Target Company. As described above,
the Disposal is structured as a share sale of the Target Company
under the Promissory Transfer Agreement. The Target Company is a
special purpose vehicle which has no activity other than holding
the Group's interest in the Senado Square Project. In addition to
acquiring the Target Company, the Buyer will also be assigned
certain Shareholder Loans issued by subsidiaries of the Company to
the Target Company.
Further information on the Senado Square Project and its
valuation is set out in Part 3 of this Circular under "Property
Valuation Report". The valuation as certified in the Property
Valuation Report represents the value of the Company's interests in
the Senado Square Project, which comprises twenty-four strata-title
units, that made up of the entire residential building located at
Travessa do Roquete no. 11 and Rua de Sé no. 9 to 11 in Macau,
excluding the basement level.
4. Information on the Continuing Group
Once the Disposal has been completed, the Company will continue
to hold real property assets. The Senado Square Project represented
19.9 per cent. of the Company's property portfolio gross assets as
at 30 June 2017 and the anticipated effect of the Disposal on the
Company's net asset position as at 30 June 2017 is set out in the
pro forma statement of net assets in Part 4 of this Circular on
page 18.
All potential divestment options for the remaining assets within
the Continuing Group are continuing to be assessed with the goal of
maximising exit values. Until such time, the Continuing Group will
continue to operate in accordance with its Investment Policy and
remain listed.
5. Summary of the Promissory Transfer Agreement and the Lock-up Agreement
In connection with the Disposal, the Sellers (being subsidiaries
of the Company) have entered into the Promissory Transfer Agreement
with the Buyer. Under the terms of the Promissory Transfer
Agreement, the Company has agreed to sell (conditionally upon
Shareholder approval having been received prior to 29 March 2018)
the Senado Square Project through the transfer of the entire issued
share capital of the Target Company and the assignment of
Shareholder Loans to the Buyer for the Purchase Price of HK$800
million (c. US$102.3 million).
The Purchase Price is payable in two components: the Deposit of
HK$15 million (c. US$1.9 million) that was paid by the Buyer upon
signing of the Promissory Transfer Agreement, with the balance of
HK$785 million (c. US$100.3 million) being payable on Completion.
Completion is conditional upon approval by Shareholders of the
Resolution. The Company expects Completion to occur on or before 29
March 2018.
Other than the Shareholder Loans, the Buyer will acquire the
Target Company free of external debt and third party contracts.
Accordingly, the Group will be required to satisfy all outstanding
principal and interest on third party financing held by the Target
Company prior to Completion. As at the date of this Circular, the
principal and interest outstanding are MOP$121.54 million (c.
US$15.1 million) and MOP$220,153 (US$27,321), respectively.
The Group will be required to provide a bank guarantee for the
amount of HK$80 million (c. US$10.2 million), representing 10 per
cent. of the agreed Purchase Price, for a period of six months
after Completion to cover any past debts, taxes or miscellaneous
fees and payments arising during the six-month period. Upon expiry
of the bank guarantee, the Company and one of its Macanese
subsidiaries will jointly provide a corporate guarantee of HK$20
million (c. US$2.6 million) to insure the Buyer against
pre-Completion debts, taxes or miscellaneous fees and payments for
a further period of six months.
Under the terms of the Promissory Transfer Agreement, the Group
is required to pay HK$15 million (c. US$1.9 million) compensation,
in addition to the return of an amount equal to the Deposit paid,
to the Buyer in accordance with local law and practice should the
Group fail to comply with its contractual obligations (including as
to completion of the Disposal). The Promissory Transfer Agreement
also contains customary warranties and indemnities given by the
Group in favour of the Buyer.
Pursuant to the Lock-up Agreement, the Group has also agreed not
to sell or agree to sell the Senado Square Project and the Target
Company to another purchaser within a period of 10 months from the
Promissory Transfer Agreement date of 2 February 2018 (should the
Disposal not proceed through the fault of the Group or if
Shareholder approval for the Disposal is not obtained).
The principal terms of the Promissory Transfer Agreement are set
out in Part 5 of this Circular.
6. Financial effects of the Disposal
If the Disposal is approved by Shareholders and Completion
occurs, the Company expects to return cash to Shareholders in line
with the Company's divestment strategy. Any return of such cash
will be in the form that the Board considers to be most
appropriate, subject to the retention of sufficient working capital
for the Company's ongoing operation. Further details of the
proposed return of sale proceeds will be announced in due
course.
Information on the expected effect of the Disposal on the assets
and liabilities of the Continuing Group is set out in the pro forma
statement of net assets of the Continuing Group as at 30 June 2017
in Part 4 of this Circular.
7. Risk factors
The Directors have given consideration to the potential risks
and uncertainties relating to the Disposal.
For a discussion of certain risk factors which Shareholders
should take into account when considering whether to vote in favour
of the Resolution, please refer to Part 2 of this Circular.
8. General Meeting
At the end of this Circular, you will find a Notice of General
Meeting of the Company, convening a general meeting which is to be
held at Lefebvre Place, Lefebvre Street, St. Peter Port, Guernsey
GY1 4HY at 12.00 p.m. on Monday, 19 March 2018.
A summary of the action you should take is set out in the
paragraph below and in the Form of Proxy that accompanies this
Circular. The Resolution seeks the approval of Shareholders for the
Disposal (as described in Part 5 of this Circular).
The full text of the Resolution to be proposed at the General
Meeting is set out in the Notice of General Meeting at the end of
this Circular. The Resolution will be proposed as an ordinary
resolution and the passing of such Resolution requires a simple
majority of the votes cast in person or by proxy.
Irrevocable undertakings to vote in favour of the Resolution
have been received from Shareholders representing more than 50 per
cent. of the Company's issued share capital as at 27 February 2018,
being the latest practicable date prior to the publication of this
Circular.
9. Action to be taken by Shareholders
If you are a Shareholder, you will find enclosed with this
document a Form of Proxy for use at the General Meeting.
Whether or not you intend to be present at the General Meeting,
please complete the Form of Proxy for the General Meeting in
accordance with the instructions printed thereon and return it to
the Registrar at the address indicated on the front page of this
document, as soon as possible, but in any event so as to arrive not
later than forty-eight hours (excluding non-working days) before
the time appointed for holding the General Meeting.
The completion and return of a Form of Proxy will not preclude
you from attending the General Meeting and voting in person if you
wish to do so.
10. Further information
Your attention is drawn to the further information set out in
Parts 2 to 6 of this Circular. You should read the whole of this
Circular and, in particular, the risk factors set out in Part 2,
before deciding on the course of action you will take in respect of
the Resolution.
11. Recommendation
The Board considers the Disposal to be in the best interests of
the Company and Shareholders as a whole.
Accordingly, the Board recommends Shareholders vote in favour of
the Resolution, as they intend to do in respect of their own
beneficial holdings which, as at 27 February 2018, being the latest
practicable date prior to the publication of this Circular, amount
in aggregate to 13,485,164 Shares, representing approximately 17.64
per cent. of the Company's existing issued share capital.
Yours faithfully
Chris Russell
Chairman"
Expected Timetable of Principal Events
Latest time and date for 12.00 p.m. on Thursday,
receipt of the Form of Proxy 15 March 2018
or transmission of CREST
Proxy Instructions for the
General Meeting
General Meeting 12.00 p.m. on Monday,
19 March 2018
Announcement of results of Monday, 19 March 2018
General Meeting
Date of Completion of the On or before Thursday,
Disposal 29 March 2018
Each of the times and dates in the expected timetable may (where
permitted by law) be extended or brought forward without further
notice and in particular the dates relating to the Disposal are
provisional only. If any of the above times and/or dates change,
the revised time(s) and/or date(s) will be notified to Shareholders
by an announcement through a Regulatory Information Service. All
references to times in this document are to London time.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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