This Abridged Circular is neither a prospectus nor an invitation to the public to subscribe for shares in Meikles Limited (“the Company” or “the Group”), but is a document issued in compliance with the Zimbabwe Stock Exchange (“ZSE”) Listings Requirements, to inform Meikles Limited Shareholders of the proposed Transactions whose terms and conditions are fully set out in this Abridged Circular.
- Shareholders of Meikles Limited are invited to attend the Extraordinary General Meeting (“EGM”), convened in terms of the Notice to Shareholders contained herein, to be held at 1030 hours on Friday, 13 December 2019 at Parklands, 26 Greenhithe Lane, Borrowdale, Harare, Zimbabwe;
- Shareholders of Meikles Limited who are unable to attend the EGM, but wish to be represented thereat should complete and sign the Form of Proxy provided at the end of this Abridged Circular and return to the Company Secretary by 1030 hours on Wednesday, 11 December 2019;
- Shareholders of Meikles Limited may attend the EGM in person, notwithstanding the completion and return of the Form of Proxy;
- If you are in any doubt as to the action you should take, please consult your stockbroker, banker, accountant or other professional advisor immediately; and
- If you no longer hold any shares in Meikles Limited, you should send this Abridged Circular as soon as possible to the stockbroker, bank or other agent through whom the sale of your shareholding in Meikles Limited was executed for onward delivery to the purchaser or transferee of your shares.
Meikles Limited (“Meikles” or “the Company” or “the Group”) is an investment holding company incorporated in 1892 with a dual listing on the Zimbabwe Stock Exchange “ZSE” (primary listing) and the London Stock Exchange “LSE” (secondary listing). The main activities of the Group span into agriculture, retail trading and hospitality. Meikles Hotel is part of the hospitality segment.
Meikles Hotel requires substantial mordenisation of guest facilities as well as electro mechanical and plumbing infrastructure to restore it to a 5-star hotel by international standards. Major upgrades of hotels require foreign currency denominated long term capital. Initial estimates indicate that up to US$30 million is required to bring Meikles Hotel to a 5-star property by international standards.
Against the foregoing background and taking into account the current and projected performance of the Hotel as well as the volatile economic environment, the Directors have concluded that the Hotel as well as the Group do not have the capacity to carry the level of foreign currency denominated debt required to fund the refurbishment.
In view of the foreign currency funding needs of Meikles Hotel and the financial risks of spending a less substantial sum on refurbishment, the Directors are proposing to dis invest from the city hotel business. It is the Directors’ view that it is best for the future of the Hotel to place its development in the hands of skilled international hotel operators with the capacity to undertake the requisite refurbishments on the Hotel.
- The proposed Transactions
Subject to regulatory and Shareholder approval, the Board is proposing that the Group makes the following disposals to ASB Hospitality (Zimbabwe) (Private) Limited:
- the disposal of the Hotel Business and related Hotel Assets of Meikles Hotel as a going concern for a total consideration of US$3.8 million; and
- the disposal of the immovable property that is the Meikles Hotel building in Harare for a total consideration of US$16.2 million.
- Terms of the proposed Transactions
Set out below are the salient features of the arm’s length negotiated and agreed terms of the two connected disposals:
3.1 The Hotel Business and related Hotel Assets disposal
3.2 The Hotel Building disposal
NB: The Board assessed and is satisfied with ASB Hospitality Zimbabwe’s capacity to fulfil the terms of the proposed Transactions, including the US$20 million combined purchase price. It should also be noted that the previous carrying value of Meikles Hotel (US$26,7 million as at 31 March 2018) was higher than the subsequent independent property valuations undertaken in April 2019 and August 2019.
- Rationale for the proposed Transactions
The principal rationale for the proposed Transactions is that the Group does not want foreign currency exposure related to borrowings to fund the required refurbishment of Meikles Hotel to bring it to a five star property by international standards. Initial estimates indicate that up to US$30 million is required for the substantial modernisation of guest facilities as well as electro mechanical and plumbing to restore the Hotel to international standards. Accordingly the Board believes that it is best for the future development of the Hotel to be placed in the hands of skilled international hotel operators with the capacity to undertake the requisite refurbishments of the Hotel.
- Use of proceeds
There are opportunities for value creation in other segments of the Group, which will be compatible with the financial strategy of the Group. Exploitation of these opportunities will coincide with the timing of the receipt of the proceeds.
The proceeds from the disposal of the Hotel would be ring-fenced and earmarked for investments that enhance the foreign currency generation capabilities of the Group, in particular further investments in hospitality and agriculture.
The table below shows a breakdown of the proposed use of the proceeds from the Transactions:
|Importation of Solar equipment||5,000,000|
|Importation of fruit processing equipment||3,450,000|
|Importation of materials for refurbishments, upgrades and expansion||10,000,000|
|Taxes (Capital Gains Tax and Recoupment)||1,200,000|
- Independent Financial Advisors’ Opinion
Having considered the proposed Transactions and based on conditions set out in the Independent Financial Advisors’ Report on the proposed Transactions, KPMG has concluded that nothing had come to their attention to cause them to believe that the proposed Transactions are not fair and reasonable to the Company and its Shareholders.