Wrap Text
Proposed transaction and renewal of cautionary announcement
DELTA PROPERTY FUND LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 2002/005129/06)
Share code: DLT
ISIN: ZAE000194049
(Approved as a REIT by the JSE)
(“Delta” or “the Company”)
PROPOSED TRANSACTION AND RENEWAL OF CAUTIONARY ANNOUNCEMENT
1. INTRODUCTION
1.1. Shareholders are referred to the Company’s cautionary
announcements dated 21 April 2017 and 6 June 2017 (“Initial
Announcements”), advising that Delta’s board of directors has
been approached by a broad-based black economic empowerment
consortium, led by members of Delta’s management,
(“Consortium”) wishing to acquire up to 51% of the Company’s
issued share capital, and has constituted an independent board
subcommittee (“Independent Board”) to assess the transaction
(“Proposed Transaction”).
1.2. Although the terms of the Proposed Transaction have not yet
been finally agreed and no formal transaction agreements have
been concluded, the parties have, since the release of the
Initial Announcements, made considerable progress towards
agreeing the terms and Delta, accordingly, wishes to provide
shareholders with an update on the current position.
2. TRANSACTION STRUCTURE
2.1. As indicated in the Initial Announcements, the Consortium
wishes to acquire a shareholding of up to 51% in Delta. However,
as a result of the black economic empowerment transaction
undertaken by Redefine Properties Limited with its 22.8% Delta
shareholding and to which the Company is not a party, it is now
proposed that the Consortium instead subscribes for
approximately 42.2% in Delta in terms of the Proposed
Transaction. If the Proposed Transaction is concluded, it would
result in –
2.1.1. the Consortium subscribing for new Delta shares (“Issue
Shares”), representing, following their issue, approximately
42.2% of the Company’s issued share capital, for a
subscription amount of approximately R4.7 billion
(“Subscription”).
2.2. While the subscription price for the Issue Shares is yet to be
finally agreed, it is currently anticipated that it will be the
greater of the 30 day volume weighted average price (adjusted
for distributions) or spot price (adjusted for distributions)
of Delta shares up to the date of the formal terms announcement.
However, the subscription price may decrease or increase,
should changes to the volume weighted average price of Delta
shares over the period prior to their issue exceed a specified
threshold.
3. RATIONALE FOR THE PROPOSED TRANSACTION
3.1. If agreed and implemented, the Proposed Transaction will
provide Delta with a significant capital injection of
approximately R4.7 billion, bolstering the Company’s balance
sheet for future investments, positioning it for growth,
reducing its loan-to-value and improving the Company’s position
in the relevant property indexes. Management has already
identified several potential acquisitions and is in
negotiations to deploy a large part of this capital injection
into a yield-accretive portfolio.
3.2. The improved black empowered shareholding structure will also
put Delta in a better position to qualify for long-term
government leases in terms of the National Department of Public
Works’ proposed new leasing policy, thereby enhancing value for
the Company and improving its weighted average lease expiry
profile, as well as reducing the cost of funding.
3.3. In addition, an improved financial profile would allow Delta
to diversify its asset and tenant portfolio.
4. FUNDING
4.1. The Consortium intends to finance the Subscription and related
costs with loan funding from an institutional funder
(“Lender”).
4.2. It is envisaged that Delta will facilitate the loan funding by
providing the Lender with a residual guarantee, the terms and
relevant limitations of which are still being negotiated
(“Guarantee”) and any additional security which may be required
by such Lender as part of its approval process.
5. TRANSACTION AGREEMENTS AND CONDITIONS PRECEDENT
5.1. As indicated above, the terms of the Proposed Transaction have
not yet been finally agreed and no formal transaction agreements
have been concluded. Accordingly, the anticipated high-level
terms of the Proposed Transaction, as detailed in this
announcement, may change in the final transaction agreements
concluded between the parties.
5.2. In addition, should formal transaction agreements be concluded,
the implementation of the Proposed Transaction will be subject
to the fulfilment of various conditions precedent, which are
expected to include, inter alia, the requisite board and
shareholder approval in respect of Delta and the Consortium,
as well as obtaining regulatory approval (to the extent
required). In addition, as the Subscription will result in the
Consortium holding more than 35% of the Company’s issued share
capital, the Proposed Transaction will be subject to Delta’s
shareholders, in terms of the Companies Regulations, 2011,
waiving the need for the Consortium to make a mandatory offer
to them to acquire all remaining shares in the Company (“Waiver
of Mandatory Offer”).
5.3. Should formal transaction agreements be concluded in respect
of the Proposed Transaction, Delta will announce the final
agreed terms to shareholders.
6. INDEPENDENT EXPERT
As indicated in the Initial Announcements, the Consortium is a
related party for purposes of the JSE Listings Requirements.
Accordingly, and in order to allow shareholders to consider and
vote on the Waiver of Mandatory Offer, the Independent Board has
appointed Mazars as independent expert (“Independent Expert”) to
provide it with external advice and to prepare a fair and
reasonable opinion in respect of the Proposed Transaction, which
includes the Subscription, and the Waiver of Mandatory Offer.
7. CIRCULAR
Should formal transaction agreements be concluded in respect of
the Proposed Transaction, Delta will distribute a circular
(“Circular”) to shareholders providing detailed information on
the Proposed Transaction, including its financial effects and
details of the Guarantee, and convening a general meeting at
which shareholders will be requested to consider and, if deemed
fit, to approve the Subscription, the provision of the Guarantee,
the Waiver of Mandatory Offer and related aspects of the Proposed
Transaction. The Circular will include the report of the
Independent Expert, as well as the view of the Independent Board.
8. RENEWAL OF CAUTIONARY ANNOUNCEMENT
Whereas the terms of the Proposed Transaction are still being
negotiated and may have a material effect on the price of the
Company’s securities, Delta shareholders are advised to continue
to exercise caution when dealing in the Company’s securities
until a full announcement is made.
3 July 2017
Johannesburg
Sponsor
Nedbank Corporate and Investment Banking
Transaction Advisors to the Consortium
PSG Capital
Kleoss Capital
Keletso M Squared
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