KAAP AGRI LIMITED – Category 2 elimination announcement – SENS

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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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