Metrofile goes to market

By Nicola Mawson for Metrofile

Johannesburg, 18 Sep 2006

JSE-listed Metrofile Holdings is to buy out the rest of storage company Metrofile, and will be recapitalised to the tune of R142 million.

As soon as the company has completed the R142 million rights offer, it aims to acquire the 35% of Metrofile, its only material asset, which it does not own.

Explaining the rational behind the transactions (which are subject to shareholder approval), on Friday, Metrofile said the company`s black economic-empowerment partners would now have a stake at holding level, as originally intentioned.

In addition, Metrofile Holdings will be able "to access and better plan the cash flows" of Metrofile, as well as being able to deal with Metrofile`s assets "in accordance with future corporate strategy", without the need to obtain minority shareholder consent.

The transactions will also increase the market capitalisation of Metrofile Holdings, which it hopes will be attractive to new investors and will strengthen the group to facilitate future corporate strategy.

Clearing out debt

Metrofile Holdings anticipates that, by the time its loans are settled in early December, it will owe R95 million to external creditors. By the same time, its third-party liabilities will be R29.5 million and the costs associated with the capital reorganisation will be about R6.5 million.

As a result, by December this year, it will need about R131 million to settle its debts. Its rights issue will be used to settle this debt and it will "retain the balance to settle other remaining liabilities and contingent liabilities that may become actual obligations".

The company told shareholders on Friday that the recapitalisation amount will be raised through the issue of 188.9 million shares at 75c each. The shares for the rights offer will be offered in a ratio of 255 rights offer shares for every 100 Metrofile Holdings shares held on the record date of the rights offer.

The rights offer will be fully underwritten by Sabvest Financial Services, a wholly owned subsidiary of Sabvest, which owns 5% of Metrofile.

Metrofile also seeks to buy-back and cancel the existing 7 million treasury shares held by MGX Management Services, as well as place 10 million Metrofile Holdings shares under the directors` control so that they can be issued if further liabilities need to be settled.

After the rights offer and the acquisition, Metrofile Holdings sees its headline earnings per share dropping 58.8% to 9.9c. The company, to end June 2006, reported headline earnings per share of 24.1c. However, these pro forma financial effects were, it said, prepared for illustrative purposes only.

The company`s shares closed at R1.58 on Friday, unchanged from Thursday`s close. Its 12-month high is R2.31 and its 12-month low is 46c a share.