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iProperty Group (ASX:IPP) and REA Group Limited (ASX:REA) are pleased to announce today that Realestate.com.au Pty Limited, a company wholly owned by REA Group Limited ("REA"), REA and IPP have entered into a Scheme Implementation Deed under which it is proposed that a newly incorporated wholly owned subsidiary of REA ("BidCo") will acquire all the IPP shares by way of a scheme of arrangement ("Scheme"). If the Scheme is implemented, IPP shareholders will be entitled to elect, on a per IPP share basis, either (a) $4.00 in cash ("Cash Consideration"), or (b) $1.20 in cash and 0.7 shares in an unlisted entity with a continuing indirect interest in IPP ("Mixed Alternative")

- Cash Consideration of $4.00 represents a 55.0% premium to the undisturbed IPP share price, prior to REA's "notice of change of interests of substantial holder" filed on 21 July 2015, a 20.1% premium to IPP's 1 month volume weighted average price ("VWAP") of $3.33 and a 29.4% premium to IPP's 3 month VWAP of $3.09. The Cash Consideration represents a compelling Enterprise Value / Last 12 Months Revenue multiple of 28.7x

- Mixed Alternative allows IPP shareholders to elect to receive a mix of cash and scrip in an unlisted Australian company and retain an indirect ongoing interest in IPP until no later than the first half of calendar year 2018

- Transaction to be effected via court approved scheme of arrangement ("Scheme").

- The IPP directors (other than the directors nominated by REA) have recommended the Scheme, subject to no Superior Proposal emerging and subject also to the independent expert giving an opinion that the Scheme is in the best interests of IPP shareholders (other than REA)

Transaction Overview

IPP today announces that it has entered into a Scheme Implementation Deed with REA and Realestate.com.au Pty Limited, a company wholly owned by REA, under which it is proposed that a newly incorporated wholly owned subsidiary of REA ("BidCo") will acquire all the IPP shares ("Proposal"). The Proposal is to be implemented by way of a Court approved scheme of arrangement ("Scheme").

If the Scheme is implemented, IPP shareholders will be entitled to elect to receive either:

- The Cash Consideration of $4.00 cash per IPP share; or

- The Mixed Alternative comprising $1.20 cash and 0.7 shares in a newly incorporated unlisted Australian company, for each IPP share. If the Scheme is implemented, RollCo will hold a minority equity interest (of between 10.7% and 20%) in BidCo.

The Cash Consideration of $4.00 cash per IPP share represents a premium of:

- 55.0% to the undisturbed IPP share price, prior to REA's "notice of change of interests of substantial holder" filed on 21 July 20151;

- 20.1% to IPP's 1 month VWAP of $3.33 to 30 October 2015; and

- 29.4% to IPP's 3 month VWAP of $3.09 to 30 October 2015.

In addition, the Cash Consideration represents a compelling Enterprise Value / Last 12 Months Revenue multiple of 28.7x.

IPP Shareholders will be able to elect to receive the Mixed Alternative. The Mixed Alternative comprises cash and an interest in RollCo, a newly formed, Australian unlisted company that will hold an indirect, minority equity interest in IPP if the Scheme is implemented. This provides shareholders with the ability to retain an indirect ongoing interest in IPP until no later than the first half of calendar year 2018.

The Scheme is conditional upon, among other things, sufficient valid elections being received for the Mixed Alternative such that the maximum cash consideration payable by REA is equal to or less than $500m. In practice, this will result in RollCo owning 10.7% or more of the ordinary shares in BidCo. RollCo's interest in BidCo is also subject to a 20% ownership cap limiting the ownership of existing IPP shareholders in BidCo. A proportionate scale back will apply if the 20% limit is exceeded.

IPP shareholders who do not make a valid election to receive the Mixed Alternative will be deemed to have elected Cash Consideration for their IPP shares. The Mixed Alternative will not be available to Ineligible Foreign Shareholders (as defined in the Scheme). Ineligible Foreign Shareholders will receive the Cash Consideration.

The IPP directors, other than the directors nominated by REA, being Mr Patrick Grove, Mr Georg Chmiel, Mr Lucas Elliott, Mr John Armstrong ("Non-REA Directors"), recommend that, subject to no Superior Proposal emerging and subject to the independent expert giving an opinion that the Scheme is in the best interests of IPP shareholders (other than REA), IPP shareholders should vote in favour of the Scheme.

Given their relationship with REA, Mr Owen Wilson and Mr Arthur Charlaftis have been excluded from the board's consideration of the Scheme and give no recommendation.

Patrick Grove, the Chairman of IPP, commented:

"After careful consideration of all options available to maximise shareholder value, the Non-REA Directors have unanimously concluded that the Proposal is on terms which we believe reflect compelling value and are in the best interests of all shareholders."

"IPP and REA are highly complementary businesses and there is strong strategic rationale underpinning a combination. IPP was listed on the ASX in 2007 and since that time, we have grown to become Asia's leading network of property websites. REA has been a very supportive shareholder of IPP since 28 July 2014 and if the Scheme is implemented we look forward to seeing IPP's business go from strength to strength."

"This is a very exciting day for IPP shareholders. This agreement allows our shareholders to either accept a very attractive cash offer for their shares or continue to participate in iProperty through accepting the Mixed Alternative"

Non exclusivity period and standstill

The Scheme Implementation Deed contains a customary exclusivity regime which includes no shop, no talk, no due diligence and notification provisions (but not a matching right provision). However, the Scheme Implementation Deed provides that those provisions do not commence operation until the date which is 20 days after the date of the Scheme Implementation Deed. (The exclusivity provisions are contained in clause 8 of the attached Scheme Implementation Deed.)

In addition, REA is subject to a standstill regime under which it has agreed, among other things and subject to certain exceptions, not to acquire any IPP shares (other than under the Scheme) until the earlier of 30 April 2016 and the time when:

- a third party publicly announces a scheme of arrangement between IPP and its members, provided that the IPP board has publicly unanimously recommended that scheme of arrangement in the absence of a superior proposal;

- a third party publicly announces a takeover bid for any of the shares in IPP (this is a reference to a proposal that would attract the operation of s631 of the Corporations Act 2001 (Cth));

- a third party publicly announces an agreement has been entered into between the IPP (or one of its associates) and the third party which, if completed, would cause a person to acquire the whole or a substantial part of the IPP's business; or

- a third party acquires an interest in 10% or more of the IPP shares, in which case there will be no restriction on REA (other than a restriction imposed by statute) acquiring an interest in any IPP shares under a takeover bid for all the IPP shares provided that (a) the consideration offered under such a takeover bid includes an all cash amount of not less than $4.00 per IPP share and (b) any conditions to the offers under such a takeover bid are no less favourable to IPP shareholders than the conditions precedent of the Scheme (however, such conditions may include a 90% minimum acceptance condition).

The standstill regime also applies to REA's related bodies corporate and associates.

IPP and REA have also agreed a customary break fee regime under which IPP or REA (as the case may be) will be liable to pay the other a break fee if certain events occur (those events are set out in clauses 9 and 10 of the attached Scheme Implementation Deed).

Terms and conditions to the Scheme

The conditions to the Proposal are contained in the Scheme Implementation Deed and include:

- The parties agreeing the form of the BidCo shareholder agreement, the BidCo constitution and the RollCo constitution;

- IPP shareholder approval;

- minimum elections for Mixed Alternative such that the maximum cash consideration is equal to or less than $500m;

- obtaining necessary Court approval;

- no material adverse change; and

- no prescribed occurrences.

The Proposal is not conditional upon REA obtaining financing.

A copy of the Scheme Implementation Deed is attached to this Announcement.

In considering the Scheme, IPP shareholders should be aware that there are a number of risk factors, both general and specific, associated with the Scheme. These risks will be set out in the Scheme Booklet, to be provided in the coming months. IPP shareholders should read the Scheme Booklet carefully and seek appropriate advice before making a decision with respect to the Proposal.

The Non-REA Directors have commissioned an independent expert report with respect to whether the Scheme is in the best interests of IPP shareholders (other than REA).

BidCo Shareholder Agreement

The Mixed Alternative consideration will be effected through the issue of shares in a special purpose Australian company, RollCo. RollCo will hold a minority interest in BidCo (of not more than 20%), which will own the shares in IPP. RollCo and Realestate.com.au Pty Limited will enter into a shareholders' agreement as shareholders in BidCo.

Summary of BidCo / RollCo structure and shareholders' agreement

The proposed BidCo / RollCo structure is outlined below:

- To the extent that IPP shareholders elect the Mixed Alternative, BidCo will issue shares to RollCo (diluting REA's 100% interest in BidCo) as consideration for RollCo issuing shares to the existing IPP shareholders in exchange for IPP shares . This will result in RollCo holding between 10.7% and 20% of the issued shares in BidCo.

- It is proposed that the rights and obligations between Realestate.com.au Pty Limited (the REA subsidiary which is the holder of shares in BidCo) and RollCo, the shareholders of BidCo, will be governed by a Shareholder's Agreement. The Shareholder's Agreement will include, amongst other things:

- Board appointment rights for each shareholder;

- Reserved board and shareholder matters, requiring special board or shareholder approvals (such as RollCo approval);

- Deadlock resolution mechanisms in the event of disagreement on certain matters by the shareholders;

- share transfer restrictions;

- REA guarantee of Realestate.com.au Pty Limited's obligations;

- Realestate.com.au Pty Limited's representation not to exercise any compulsory acquisition rights in respect of BidCo or RollCo;

- non-compete obligations;

- arrangement by REA of a $10m working capital facility for IPP.

- Put options granted in favour of RollCo shareholders by Realestate.com.au Pty Limited will provide a progressive exit mechanism for RollCo shareholders, allowing them to sell their RollCo shares to Realestate.com.au Pty Limited during exercise windows following release of BidCo's FY16 and FY17 audited accounts. The sale price for RollCo shareholders is related to the ongoing performance of IPP and consideration paid to shareholders is subject to IPP reaching certain revenue and EBITDA hurdles.

- To the extent that the exercise of put options does not result in the sale of all shares in RollCo to Realestate.com.au Pty Limited following release of BidCo's FY17 audited accounts, Realestate.com.au Pty Limited may exercise call options over any remaining RollCo shares it does not already own.

Intention of major shareholder

Catcha Group Pte Ltd ("Catcha") holds 31,349,014 IPP shares, representing c.16.7% of IPP shares outstanding. Catcha has advised IPP that its intention is to vote in favour of the Proposal in the absence of a Superior Proposal and subject to the independent expert giving an opinion that the Proposal is in the best interests of IPP shareholders (other than REA).

Indicative timetable

An indicative timetable for the Scheme is set out below:

Event                             Expected Date
First Court Hearing Date      Mid December 2015
Dispatch of Scheme Booklet    Mid December 2015
Scheme Meeting Late                January 2016
Second Court Hearing Early        February 2016
Implementation Date           Mid February 2016

Further information

Goldman Sachs is acting as financial advisor, and Herbert Smith Freehills is acting as Australian legal advisor, to IPP.

To view the release, please visit:
http://media.abnnewswire.net/media/en/docs/ASX-IPP-889017.pdf


About iProperty Group Ltd

Headquartered in Kuala Lumpur, Malaysia, iProperty Group Ltd (ASX:IPP) is focused on developing and operating leading real estate portals and delivering the most comprehensive set of related real estate services and project marketing across the Region. The Group owns portals which are market leaders in Malaysia, Thailand, Indonesia and the Hong Kong Region and a leading portal in Singapore. The iProperty Group is continuously working to capitalise on its market-leading positions and the rapidly growing online property advertising market throughout the region.

    

Contact

iProperty Group Ltd
T: +60-3-2264-6888
F: +60-3-2264-6999
WWW: www.iproperty-group.com



Link: Proposed merger between iProperty Group and REA Group



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