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Acquisition of shares in Arrowhead in exchange for Fairvest shares; proposed internalisation; renewal of cautionary
FAIRVEST PROPERTY HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1998/005011/06)
JSE share code: FVT ISIN: ZAE 000203808
(Approved as a REIT by the JSE Limited)
(“Fairvest”)
ACQUISITION OF SHARES IN ARROWHEAD PROPERTIES LIMITED IN EXCHANGE FOR FAIRVEST SHARES;
PROPOSED INTERNALISATION OF ASSET MANAGEMENT FUNCTION AND RENEWAL OF CAUTIONARY
1. INTRODUCTION
Shareholders are advised that Fairvest has concluded agreements in terms of which Fairvest will acquire
B ordinary shares (“AHB shares”) in Arrowhead Properties Limited (“Arrowhead”) in exchange for
Fairvest shares (“FVT shares”), (the “Transactions”).
2. RATIONALE
Fairvest intends to exercise its rights as an Arrowhead shareholder to unlock value for shareholders of
both Arrowhead and Fairvest, an initiative that has been received positively by shareholders in both
companies as referred to below. It is Fairvest’s view that investors generally favour larger REITs in which
their investment is liquid and have confidence in Fairvest’s ability to unlock value both operationally and
through capital allocation within its traditional low-income retail focus as well as from other sub-classes
of investment property.
3. TERMS OF THE TRANSACTION
Fairvest has concluded agreements with the following Arrowhead shareholders (“Vendors”) to acquire
AHB shares in exchange for FVT shares at a share swap ratio of 1.85 FVT shares per AHB share.
Name of Vendor Number of AHB shares Percentage that committed
committed to be swapped AHB shares constitute of
for FVT shares total Arrowhead shares in
issue(1)
36ONE Asset Management (Pty) Ltd 139 987 801 13.8%
Vukile Property Fund Limited (“Vukile”) 114 438 564 11.3%
Catalyst Fund Managers SA (Pty) Ltd 90 050 346 8.9%
Visio Fund Management (Pty) Ltd 87 400 000 8.6%
Ninety One SA (Pty) Ltd 30 271 219 3.0%
Counterpoint Asset Management 17 320 000 1.7%
Catalyst Fund Managers Alternative 14 357 152 1.4%
Investments (Pty) Ltd
Bridge Fund Managers (Pty) Ltd 10 073 699 1.0%
Knight Capital (Pty) Ltd 2 279 900 0.2%
Cohesive Capital (Pty) Ltd 1 600 000 0.2%
Total 507 778 681 50.1%
(1) Total Arrowhead shares in issue of 1 014 140 687 calculated as 62 718 658 AHA shares plus 976 956 729 AHB shares
less the specific repurchase of 25 534 700 AHB shares from the Arrowhead Charitable Trust approved at the Arrowhead
annual general meeting held on Thursday, 25 February 2021.
The agreements with Vendors include the following salient terms:
• Fairvest will acquire AHB shares in exchange for newly issued FVT shares at a share swap ratio
of 1.85 FVT shares per AHB share (“share swap ratio”).
• The Vendors will be afforded the benefit of any increased swap ratio that Fairvest may agree to in
the six months after implementation of the Transactions. The circumstances in which this may
become applicable are if Fairvest acquires AHB shares at an increased swap ratio or agrees to
facilitate a transaction pursuant to which Arrowhead acquires all the issued shares in Fairvest in
exchange for Arrowhead shares at a materially more favourable swap ratio.
• In order to account for the implementation of any accretive disposals by Arrowhead in the near
term, Fairvest is comfortable to adjust the swap ratio should any such disposal improve
Arrowhead’s distributable earnings and/or tangible net asset value (“TNAV”) per share. The
adjustment to the share swap ratio will be in proportion to:
- the extent to which Arrowhead’s distributable earnings per AHB share for the year ending
30 September 2021 exceed 44.989 cents per AHB share as a direct result of the transaction
in question, taking into account the forward yield of the asset disposed of and any reduction
in interest costs arising from the use of the net proceeds of the disposal (net of transaction
fees and any taxes and hedge breakage costs); or
- the extent to which Arrowhead’s TNAV per AHB share exceeds 631 cents per AHB share
(as reported at 30 September 2020) as a direct result of the transaction in question, taking
into account the net proceeds of the disposal (net of transaction fees and any taxes and
hedge breakage costs).
• If a Vendor receives a bona fide offer from a third party (“superior offer”) that is legally binding
and enforceable, is qualitatively superior to the Fairvest share swap and offers the Vendor an
aggregate consideration for all of its AHB shares that is, or implies, a value per AHB share that
exceeds the value per AHB share implied by the share swap ratio by 10% or more, the Vendor may
notify Fairvest thereof in writing (“offer notice”). Within 5 business days of receipt of the offer
notice, Fairvest may either match or exceed the superior offer by improving the share swap ratio
and/or undertaking to make a cash payment. If Fairvest does not match or exceed the superior offer,
the agreement between the Vendor and Fairvest shall terminate.
• Where Vendors manage third party funds invested in AHB shares and their client has the right to
decide whether or not to agree to the share swap, some Vendors have undertaken to recommend to
their clients that they also agree to the share swap, which would increase the number of AHB shares
to be acquired by Fairvest. Where Vendors manage third party funds invested in AHB shares,
withdrawals of third-party funds or liquidity requirements may result in adjustment to the number
of committed AHB shares.
• The Vendors have indicated that they will vote in favour of the resolutions required to implement
the Transactions.
4. CONDITIONS PRECEDENT TO THE TRANSACTIONS
The Transactions are subject to the fulfilment of the following conditions precedent within 120 days from
signature of the agreements:
- Fairvest acquiring sufficient AHA shares and/or AHB shares to exercise a 50% +1 majority of the
voting rights attached to all issued Arrowhead shares at a combined general meeting of AHA and
AHB shareholders;
- Fairvest shareholders approving all resolutions required to implement the Transactions; and
- all applicable regulatory and statutory approvals having been obtained from the JSE, Takeover
Regulation Panel, CIPC and Competition Authorities, as appropriate.
The Transactions are to be implemented within 20 business days after the fulfilment of the conditions
precedent.
5. RELATED PARTY TRANSACTION
As Vukile is a material shareholder in Fairvest, the agreement to acquire AHB shares from Vukile
constitutes a related party transaction in terms of the JSE Listings Requirements. As a result, unless
otherwise ruled by the JSE, this agreement is conditional on receipt of shareholder approval by a 50%
majority (excluding the votes of Vukile and its associates) and, in accordance with the JSE Listings
Requirements, the Fairvest board of directors will obtain an independent expert opinion on the fairness of
the proposed share swap with Vukile.
6. DESCRIPTION OF THE BUSINESS CARRIED ON BY THE SUBJECT OF THE TRANSACTIONS
The subject of the transactions is AHB shares issued by Arrowhead. Arrowhead is a JSE-listed REIT,
owning a direct property portfolio and an interest in other JSE-listed REITs, details being available on its
website at https://arrowheadproperties.co.za./.
7. FINANCIAL INFORMATION
The following profitability metrics are attributable to Arrowhead, as extracted from Arrowhead’s annual
financial statements for the year ended 30 September 2020:
Cents
Distributable income per AHB share 45.39
Distribution per AHB share* 32.99
Net asset value per AHB share 631.00
Loss per combined shares in issue (70.65)
Headline loss per combined shares in issue (7.00)
*Based on a 76.5% pay-out ratio.
8. CATEGORISATION OF TRANSACTIONS
In terms of the JSE Listings Requirements, the aggregated acquisition of AHB shares pursuant to the
Transactions will require shareholder approval. Details of the Transactions, together with, inter alia, the
required pro forma financial effects, will be included in the category 1 acquisition circular to be sent to
shareholders in due course.
9. PROPOSED INTERNALISATION OF FAIRVEST’S ASSET MANAGEMENT FUNCTION
Fairvest intends proposing to its shareholders that they approve the internalisation of its asset management,
as the ten year initial duration of the current asset management contract expires at the end of 2021. The
asset management internalisation would constitute a related party transaction in terms of the JSE Listings
Requirements and would be conditional on Fairvest shareholder approval. A board committee of
independent non-executive directors of Fairvest is finalising the details of what will be proposed to
Fairvest shareholders.
10. SUPPORT FROM FAIRVEST SHAREHOLDERS
Fairvest has received undertakings of support from the following Fairvest shareholders, to vote in favour
of the shareholder resolutions required to implement the Transactions.
Name of Fairvest shareholder Number of FVT shares Percentage of FVT shares
held held(1)
Vukile 140 387 931 14.2%
MICC Properties (Pty) Ltd, a subsidiary 130 006 881 13.1%
of Vukile
Counterpoint Asset Management 67 278 865 6.8%
Stanlib Asset Management (Pty) Ltd 66 123 451 6.7%
Visio Fund Management (Pty) Ltd 53 100 000 5.4%
Ninety One SA (Pty) Ltd 44 574 642 4.5%
Bridge Fund Managers (Pty) Ltd 37 508 545 3.8%
Cohesive Capital (Pty) Ltd 34 837 653 3.5%
Catalyst Fund Managers SA (Pty) Ltd 31 023 859 3.1%
Catalyst Fund Managers Alternative 14 000 000 1.4%
Investments (Pty) Ltd
36ONE Asset Management (Pty) Ltd 6 515 986 0.7%
Knight Capital (Pty) Ltd 4 480 518 0.5%
Total 629 838 331 63.7%
(1) Total Fairvest shares in issue of 989 468 351 calculated as 1 027 332 675 less 37 864 324 treasury shares.
11. RENEWAL OF CAUTIONARY
This announcement contains full details of the Transactions as required in terms of the JSE Listings
Requirements. However, as Fairvest is engaging further with Arrowhead, shareholders are advised to
continue to exercise caution in their dealings in Fairvest shares.
12. FAIRVEST BOARD RESPONSIBILITY STATEMENT
The board of the directors of Fairvest collectively and individually accepts responsibility for the
information contained in this announcement and certifies that, to the best of its knowledge and belief, the
information contained in this announcement relating to Fairvest is true and this announcement does not
omit anything that is likely to affect the import of such information.
18 May 2021
Corporate advisor and transaction sponsor to Fairvest
Java Capital
Legal advisor to Fairvest
Werksmans
Sponsor to Fairvest
PSG Capital
Date: 18-05-2021 12:30:00
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