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GRT - Growthpoint - Acquisition and establishment of a Share Incentive Scheme
GROWTHPOINT PROPERTIES LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1987/004988/06)
Share code: GRT & ISIN: ZAE000037669
("Growthpoint")
ACQUISITION BY GROWTHPOINT OF THE PROPERTY FUND MANAGEMENT AND PROPERTY
ADMINISTRATION BUSINESSES OF INVESTEC PROPERTY GROUP LIMITED AND THE
ESTABLISHMENT OF AN EXECUTIVE AND STAFF SHARE INCENTIVE SCHEME FOR GROWTHPOINT
AND WITHDRAWAL OF A CAUTIONARY ANNOUNCEMENT
1 Introduction
Further to the cautionary announcement released on SENS on 22 May 2007, Investec
Bank Limited is authorised to announce that agreement was reached on 24 May 2007
whereby Growthpoint will acquire the property fund management business from
Investec Property Group Limited ("IPG"), the AMU Trust and Phatsima Properties
(Pty) Limited ("Phatsima") and the property administration business from IPG,(
collectively the "Property Services businesses") as a going concern ("the
proposed transaction").
IPG is a wholly owned subsidiary of Investec Limited ("Investec") and its
operations include property development, property fund management, property
administration and listed property investment management. The property
development and listed property investment management businesses will not form
part of the proposed transaction.
In terms of the asset management agreement entered into between IPG,
Growthpoint, and Growthpoint Managers (Pty) Limited, a wholly owned subsidiary
of IPG, ("the Manco Agreement"), IPG was appointed as the asset manager to
Growthpoint. Pursuant to Growthpoint`s empowerment transactions, IPG entered
into agreements with AMU Trust and Phatsima, (collectively, "the BEE Partners")
in terms of which the AMU Trust and Phatsima acquired 12% and 2.3% respectively
of the rights to the income and the obligations accruing to IPG in terms of the
Manco Agreement. The proposed transaction includes the purchase by Growthpoint
of the right to income from the Manco agreements owned by the BEE Partners. In
terms of a separate agreement ("the property administration agreement") between
Growthpoint and IPG, IPG was appointed as the property administrator of the
Growthpoint property portfolio.
On conclusion of the proposed transaction the Manco agreements and property
administration agreement will be terminated and the asset management and
property administration functions will be performed internally within
Growthpoint.
The effective date of the proposed transaction, which is subject to the
suspensive conditions set out in paragraph 3 below, is 1 July 2007.
2 Purchase Consideration
Growthpoint has agreed to acquire the Property Services businesses, including
the pro rata share of the right to income from the Manco agreements owned by the
BEE Partners, for a total aggregate purchase consideration of R1,572.8 million
(one billion five hundred and seventy two million and eight hundred thousand
rand), ("the purchase consideration"). The purchase consideration will be
settled through the issue of 98 300 000 new Growthpoint linked units at a
price of 1600 cents per linked unit, ex distribution for the 6 month period
ending 30 June 2007.
3 Suspensive Conditions
The proposed transaction is subject to, inter alia, the fulfillment of the
following suspensive conditions:
* The signing of binding legal agreements between IPG, Investec, the BEE
Partners and Growthpoint
* Granting of all regulatory approvals as may be required from various
authorities including the Competition Authorities
* Growthpoint obtaining approval for the acquisition from the requisite
majority of Growthpoint linked unitholders, ("unitholders") in a general
meeting.
4 Rationale
Growthpoint`s rationale for entering into the proposed transaction includes:
* International investors tend to favour internally managed property funds
over externally managed property funds
* Growthpoint is preparing itself for the introduction of the Real Estate
Investment Trust ("REIT") or similar structure in South Africa. In a REIT
environment most property funds are internally managed.
* Alignment of staff and management`s interests with Growthpoint unitholders
* Perceived conflicts of interest arising from the external management model
will be eliminated
* Removal of the asset management fee will allow Growthpoint to be more
competitive in pricing new acquisitions
* Increased cost savings and the achievement of economies of scale from
employing own staff versus paying a management fee
As Growthpoint approaches the size for potential inclusion in the JSE Alsi Top
40 Index, and as South Africa`s largest property holding and investment company,
the Growthpoint Board are of the view that the company should have its own
management and should conform with international trends in the REIT industry.
5 Related party transaction
In terms of the Listings Requirements of the JSE Limited ("JSE") IPG and the BEE
partners as the asset managers of Growthpoint are related parties to Growthpoint
and Investec as a material shareholder of IPG is a related party to Growthpoint
(collectively "the related parties"). Consequently, the proposed transaction
will be regarded as a related party transaction for Growthpoint. Accordingly,
Growthpoint is required to obtain an independent fair and reasonable opinion and
unitholder approval for the proposed transaction in a general meeting of its
unitholders.
6 Appointment of an independent sub-committee of the Growthpoint Board
An independent sub-committee of the Growthpoint Board, (the "independent sub-
committee") comprising independent non-executive directors not related to the
related parties was appointed to consider the transaction. This sub-committee
has approved the transaction subsequent to appointing an independent advisor to
provide them with scenario valuations relating to the purchase price. In
addition, the independent non-executive directors on the Growthpoint Board have
approved the proposed transaction.
7 Independent fair and reasonable opinion
The independent sub-committee will appoint an independent advisor to determine
whether the terms and conditions of the proposed transaction are fair and
reasonable to Growthpoint unitholders. Details of the opinion of the independent
advisor will be provided in a circular to be posted to unitholders.
8 Executive Management
Growthpoint has ensured that there will be continuity of management for the
company and has concluded service agreements with the Chief Executive Officer,
Norbert Sasse and the fund executive Estienne de Klerk. In addition, the
executive team that will lead the Company going forward will comprise of key
individuals currently employed by IPG`s Property Services businesses.
9 Executive and Staff Share Incentive Scheme
IPG`s Property Services businesses employ approximately 243 staff located in
Johannesburg, Durban and Cape Town. IPG`s Property Services staff will be
transferred to Growthpoint as a result of the proposed transaction. Furthermore,
IPG Property Services staff will be re-employed by Growthpoint without loss of
benefits which accrued during their tenure with Investec.
Growthpoint will implement an executive and staff share incentive scheme. The
objectives of the executive and staff incentive scheme will be to:
* Retain staff and key executives
* Motivate key staff to drive the business to a new level
* Align the interests of staff and executive management with those of
unitholders
* Ensure that executives have a meaningful stake in the company
The executives and staff to be transferred from Property Services will all be
included in the scheme and it is proposed that initially Growthpoint issue
approximately 11 million fully paid up linked units into an executive and staff
share trust.
Further details on the proposed executive and staff share incentive scheme will
be included in the circular to unitholders which will be posted in due course.
10 Continued relationship with Investec
The future relationship between Growthpoint and IPG will be formalised in a
cooperation agreement in terms of which IPG will continue to offer new property
development and investment opportunities to Growthpoint first, whilst
Growthpoint will offer new and re-development opportunities in its portfolio to
IPG`s property development arm first. It is also agreed that Growthpoint will
administer all properties owned by Investec. All transactions will take place on
an arms length basis at market related terms.
11 Financial Information
The table below sets out the un-audited financial information of the proposed
transaction, including the executive and staff share incentive scheme, at an
implied yield of 9.26% based upon the purchase consideration and the budgeted
income of the Property Services businesses to 31 March 2008 of R145.7 million.
New units Distributable Distribution
income per new
(R`million) linked unit
(cents)
Proposed transaction 98,300,000 145.7 148.2
purchase consideration
Executive and staff share 11,000,000 - -
incentive scheme
109,300,000 145.7 133.3
12 Further Announcements and Documentation
Announcements setting out the salient dates and the historical pro forma
financial effects of the proposed transaction will be made in due course.
A circular to be approved by the JSE, providing further information on the
proposed transaction and the executive and staff share incentive scheme is
expected to be posted to unitholders in due course.
13 Withdrawal of cautionary announcements
Unitholders are advised that as a result of the publication of this
announcement, the relevant cautionary announcement is now withdrawn.
Sponsor
Investec Bank Limited
Attorneys to Growthpoint
Jowell Glyn Marais
Date: 30/05/2007 09:00:03 Supplied by www.sharenet.co.za
Produced by the JSE SENS Department.
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