Dis-Chem Pharmacies Limited (JSE:DCP) News - Small Related Party Transaction

Dis-Chem Pharmacies Limited
(Incorporated in the Republic of South Africa)
(Registration number 2005/009766/06)
JSE share code: DCP ISIN: ZAE000227831
(“Dis-Chem” or “the Company” or “the Group”)

ANNOUNCEMENT REGARDING RELATED PARTY TRANSACTIONS BETWEEN DIS-CHEM DISTRIBUTION
PROPRIETARY LIMITED AND COMMERCIAL PROPERTIES HOLDINGS PROPRIETARY LIMITED, MINLOU HOLDINGS
PROPRIEATRY LIMITED, KZN WAREHOUSE PROPRIETARY LIMITED, CT DISTRIBUTION CENTRE PROPRIEATRY
LIMITED AND ELEADORA PROPRIEATRY LIMITED

1.   Introduction

     Shareholders are advised that Dis-Chem Distribution Proprietary Limited (“Dis-Chem Distribution” or
     “Purchaser”), a wholly-owned subsidiary of Dis-Chem, has entered into sale and purchase agreements relating
     to the following acquisitions:

     •    100% of the issued share capital and claims in CT Distribution Centre Proprietary Limited (“CT
          Distribution Centre”), which company’s main asset is Erf 25271 situated at 6 La Belle Road, Stikland,
          Bellville, 7530, from Commercial Properties Holdings (“Commercial Properties”) for a cash consideration
          of R75,517,507. CT Distribution Centre is a rental property company that currently earns a monthly rental
          from Dis-Chem Distribution of R1,971,664 (excluding VAT);

     •    100% of the issued share capital and claims in KZN Warehouse Proprietary Limited (“KZN Warehouse”),
          which company’s main asset is Portion 26 of Erf 140 situated at 237 Roger Sishi Road, New Germany,
          from Commercial Properties for a cash consideration of R73,785,315. KZN Warehouse is a rental
          property company that currently earns a monthly rental from Dis-Chem Distribution of R1,252,067
          (excluding VAT); and

     •    100% of the issued share capital and claims in Eleadora Proprietary Limited, which company’s main asset
          is Erf 1756 and 1884 situated at 7 Fourth Street, Delmas, from Commercial Properties and Minlou
          Holdings Proprietary Limited (“Minlou Holdings”) for a cash consideration of R67,585,724. Eleadora
          Proprietary Limited is a rental property company that currently earns a monthly rental from CJ
          Enterprises Proprietary Limited of R494,316 (excluding VAT.

     (collectively the “Transactions”).

2.   Rationale for the Transaction

     Dis-Chem is South African Group of Companies specialising in the retail and distribution of pharmacy and
     healthcare products. The Transactions allow Dis-Chem to own three of its five distribution centres and
     achieve a reduction in rental expenses incurred outside the Group. The ownership of the assets ensures
     that the Group holds the necessary strategic assets for long term growth.

3.   Related parties

     Commercial Properties and Minlou Holdings are related parties to Dis-Chem as they are wholly-owned by
     directors, previous directors and prescribed officers of Dis-Chem, who collectively are also material
     shareholders of Dis-Chem.

     The directors and prescribed officers of Dis-Chem that own the majority of Commercial Properties and Minlou
     Holdings are:
         • IL and LF Saltzman
         • SE Saltzman
         • SRN Goetsch
         • BI Epstein
         • KS Sterling
         • CJ Williams
     In terms of Section 10.7 of the Listings Requirements of the JSE Limited (“JSE”), when aggregated the
     Transactions are categorised as a small related party transaction.

4.   Net asset value

     The value of the net assets and profits before tax attributable to the net assets that are subject to the
     Transactions based on management accounts prepared in terms of IFRS as at 31 November 2021 are R86
     million and R10 million respectively (CT Distribution Centre Proprietary Limited), R78million and R4 million
     respectively (KZN Warehouse Proprietary Limited) and R67 million and R4 million respectively (Eleadora
     Proprietary Limited).

     The Board has satisfied itself in terms of the quality of the management accounts referred to above.

5.   Conditions precedent

     The effective date of the Transactions is 01 March 2022, however consolidation into the Group will only
     become effective once the following conditions precedent have been met:
      • the approvals of the Competition Commission and the Competition Tribunal for the purchase of the CT
          Distribution centre and KZN Warehouse required in terms of the Competition Act; and
      • All such written approvals and resolution as legally required.

6.   Independent fairness opinion

     In terms of the JSE Listings Requirements the Company is required to provide the JSE with written
     confirmation from an independent professional expert confirming whether the terms and conditions of the
     Transactions are fair to Dis-Chem Shareholders.

     In compliance with paragraph 10.7(b) of the JSE Listings Requirements, BDO Corporate Finance Proprietary
     Limited ("BDO") was appointed by the Company as the independent professional expert and has furnished
     the Dis-Chem board of directors with its opinion (“Independent Expert Opinion”) confirming that the terms
     of the Transactions are fair to Dis-Chem Shareholders.

     The Independent Expert Opinion has been reviewed by the JSE and is available for inspection at Dis-Chem’s
     registered office, 23 Stag Road, Midrand, 1685, for a period of 28 days from the date of this SENS
     announcement. Shareholders will be advised further in this regard.

Midrand
25 January 2022

Sponsor
The Standard Bank of South Africa Limited

Independent Expert
BDO Corporate Finance

Date: 25-01-2022 08:40:00
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