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Acquisition and Cautionary
Growthpoint Properties Limited
(Incorporated in the Republic of South Africa)
(Registration number 1987/004988/06)
Linked unit code: GRT ISIN ZAE000037669
(“Growthpoint”)
OFFER BY GROWTHPOINT TO ACQUIRE ALL OF THE PROPERTY ASSETS OF FOUNTAINHEAD
PROPERTY TRUST AND CAUTIONARY ANNOUNCEMENT
Growthpoint linked unitholders are advised that Growthpoint has submitted to the board of directors of
Fountainhead Property Trust Management Limited (as manager of Fountainhead Property Trust)
(“Manco”) an offer (the “Offer”) to acquire (“Proposed Acquisition”) as a going concern, the entire letting
enterprise of Fountainhead Property Trust (“Fountainhead” or the “Enterprise”). The Proposed
Acquisition is subject to the suspensive conditions set out in paragraph 4.
Description of Fountainhead
Fountainhead is a property unit trust with property assets of R10.3 billion, as disclosed in its 31 March
2012 interim financial results, and a current market capitalisation of circa R9 billion. In terms of value,
as disclosed in the 2011 Annual Report, Fountainhead is comprised of 72% retail properties, with office,
industrial and specialised properties accounting for 18%, 6% and 4% respectively.
Fountainhead’s strategy since it was established in 1983 has been to acquire quality properties with
good growth prospects and to refurbish existing assets all with a view to creating superior returns for its
unitholders. Through this strategy, Fountainhead has built a quality property portfolio totalling 67
properties, the majority comprising attractive retail properties, the likes of which include Centurion Mall
and Westgate Shopping Centre in Gauteng, and Blue Route Mall, N1 City Mall and Kenilworth Centre in
the Western Cape. Moreover, the retail property portfolio is well positioned to serve the growing middle-
income market, and thereby benefit from the increasing importance of this market segment.
Fountainhead’s top ten properties, as detailed below, account for circa R7.3 billion of value (being 70%
of the total property portfolio):
Value as at Rentable
Property 30 Sep 2011 area Location
2
(R’000) (m )
1
Centurion Mall 3 006 077 84 346 Heuwel Avenue, Centurion
2
Westgate Shopping Centre 689 868 43 797 Ontdekkers Road, Roodepoort
Kenilworth Centre 665 242 46 862 Doncaster Road, Kenilworth
3
N1 City Mall 577 171 37 241 Louwtjie Rothman Street, Goodwood
The Boulders Shopping Centre 542 498 48 632 Old Pretoria Road, Midrand
Benmore Gardens Shopping Centre 519 087 22 682 Benmore Road, Sandton
Blue Route Mall 516 260 39 520 Tokai Road, Tokai, Cape Town
Douglas Roberts Centre 271 664 19 166 22 Skeen Boulevard, Bedfordview
Bryanston Shopping Centre 231 228 11 634 Hobart Road, Bryanston
4
Constantia Kloof 3 219 955 12 821 William Nicol North Street,
Constantia Kloof
Note:
1
Value based on information disclosed in 2012 Interim Financial Results
2
Holds 41% interest in property
3
Holds 58% interest in property
4
Holds 80% interest in property
Rationale
Growthpoint’s strategy is to acquire quality property assets across the retail, office and industrial sectors
which offer unitholders sustainable growth in distributable income as well as long term capital growth. To
this end Growthpoint has been looking to add to its portfolio of assets, particularly in the retail property
sector for some time.
The Fountainhead property portfolio is comprised predominantly of high quality retail assets, the
combined size of which is rare in the local property market. Such a portfolio will be complementary to
Growthpoint’s existing retail portfolio, and achieve Growthpoint’s objective of increasing its exposure to
quality retail properties in premier locations.
Furthermore the portfolio offers Growthpoint the opportunity to increase its geographic diversification
with properties such as Centurion Mall, located in Centurion, Blue Route Mall in Muizenberg, N1 City
Mall in Goodwood and Kenilworth Centre in Cape Town.
Whilst the financial effects have not been finalised at this stage, the Proposed Acquisition is anticipated
to be yield enhancing to Growthpoint linked unitholders.
The Offer and Proposed Acquisition
The salient terms of the Proposed Acquisition include:
1. The purchase consideration for the Enterprise will be settled on the effective date:
a. partly in Growthpoint linked units as contemplated in paragraph 2; and
b. partly in cash as contemplated in paragraph 3.
2. Growthpoint will allot and issue to Fountainhead such number of Growthpoint linked units
(“Growthpoint Consideration Units”) as equals 35 Growthpoint linked units for every 100
Fountainhead participatory units (the “Offer ratio”) in existence at the effective date. The Offer
ratio, based on clean unit prices for Growthpoint and Fountainhead, equates to a premium to:
a. the closing price of Fountainhead units on 22 October 2012 of 15%;
b. the 10 day VWAP of Fountainhead units on 22 October 2012 of 15%; and
c. the 30 day VWAP of Fountainhead units on 22 October 2012 of 14%.
In addition to the attractive premium offered to Fountainhead unitholders, the Offer will benefit
Fountainhead unitholders by way of, inter alia, the following:
• exposure to Growthpoint’s portfolio of quality properties which are unparalleled in terms of
diversification;
• Growthpoint’s greater liquidity and tradability, partly arising from the increased weighting
in global and local indices as a result of the Proposed Acquisition:
o FTSE/JSE Top 40 listed company with a ranking of circa 26 and a market
capitalization post implementation of the Proposed Acquisition in excess of R54
billion;
• access to debt funding at preferential funding rates based on Growthpoint’s alternative
sources to debt funding and superior credit ratings;
• exposure to a diversified portfolio of quality Australian office and industrial assets which
offers an attractive income return in AUD hard currency; and
• exposure to the iconic and world renowned V&A Waterfront property together with the
future development potential thereof.
3. The cash portion of the purchase consideration will be utilised to settle Fountainhead’s
outstanding interest bearing debt (“Fountainhead Debt”) as at the effective date of the
Proposed Acquisition. The Fountainhead Debt will be the amount reported by Fountainhead as
its interest bearing debt in its annual results for the year ending 30 September 2012 and will be
adjusted for capital expenditure, repayments of debt during, and other agreed expenses for,
the period between 30 September 2012 and the effective date of the Proposed Acquisition.
These adjustments will be confirmed in the due diligence investigation contemplated in
paragraph 4 (b).
Growthpoint is in the process of securing the necessary funding for the Fountainhead Debt. It is
envisaged that Growthpoint will use primarily long term debt funding, comprising a mix between
bank funding and funding raised in the debt capital markets.
4. The Proposed Acquisition will be subject to the following suspensive conditions:
a. the conclusion of formal transaction agreements (the “Definitive Agreements”) on terms
which are usual for a transaction of the nature of the Proposed Acquisition;
b. the conclusion of a confirmatory due diligence investigation to the satisfaction of
Growthpoint, which due diligence investigation may be waived at the sole discretion of
Growthpoint;
c. the approval of Growthpoint linked unitholders in general meeting for the creation of the
Growthpoint Consideration Units and the Proposed Acquisition (as a Category 1
Transaction under the JSE Listings Requirements);
d. the approval of Fountainhead unitholders in general meeting for the Proposed Acquisition
(as a Category 1 Transaction under the JSE Listings Requirements) and any amendment
required to be made to the trust deed constituting Fountainhead to enable the distribution
contemplated in paragraph 5 (a);
e. the approval of the competition authorities for the Proposed Acquisition and such other
regulatory approvals as may be required, including the approval of the Registrar of
Collective Investment Schemes and the JSE; and
f. Growthpoint raising the required debt funding to fund the cash portion of the purchase
consideration to be utilised to settle the Fountainhead Debt.
5. Subsequent to the effective date of the acquisition of the Enterprise by Growthpoint:
a. the Growthpoint Consideration Units and the net working capital of Fountainhead,
including its distributable income up to the effective date, will be distributed to the
unitholders of Fountainhead;
b. the listing of Fountainhead on the JSE will be terminated; and
c. Fountainhead will be wound up.
The Growthpoint Consideration Units will only be entitled to participate in Growthpoint income
distributions from the effective date. Prior to allotting and issuing the Growthpoint Consideration
Units, a special distribution will be paid to Growthpoint linked unitholders for the period from the
previous Growthpoint reported interim period or financial year end, whichever is applicable, to
the effective date, to ensure that both Growthpoint linked units and Fountainhead units are ex
any distribution on the effective date.
6. Growthpoint understands that pre-emptive or similar rights exist over the following
Fountainhead properties:
Westgate Shopping Centre
Southgate Mall
Southgate Value Market
N1 City Mall
Constantia Kloof 3
Sunridge
(collectively the “Pre-Emptive Properties”)
Growthpoint will confirm the nature of, and detail relating to, these rights in the due diligence
investigation contemplated in paragraph 4 (b). The Definitive Agreements will incorporate an
appropriate mechanism to provide for the application of any sale proceeds realised from the
exercise by any third party of these rights in respect of the Pre-Emptive Properties.
7. Growthpoint’s due diligence will be confirmatory in nature. The Offer ratio has been determined
through the use of I-Net consensus forecasts for Fountainhead of 59.0 cents and 63.3 cents for
the years ending 30 September 2013 and 30 September 2014 respectively (the “Fountainhead
Forecast Distributions”). To the extent concerns are identified in the confirmatory due diligence
which are likely to have an impact on value of greater than 2% to the Fountainhead Forecast
Distributions, or 5% of the reported tangible net asset value of Fountainhead as at 30
September 2012, the Offer ratio will be adjusted.
Cautionary announcement
Growthpoint is in the process of engaging with the board of directors of Manco, Fountainhead
unitholders and the relevant regulators, in relation to the Proposed Acquisition and as a result,
Growthpoint linked unitholders are hereby advised that if the negotiations are successfully concluded, it
may have an effect on the price of Growthpoint’s linked units.
Accordingly, Growthpoint linked unitholders are advised to exercise caution when dealing in their linked
units until a further announcement is made.
23 October 2012
Investment bank Sponsor
Investec Corporate Finance Investec Bank Limited
Legal advisers
Glyn Marais Incorporated
Date: 23/10/2012 04:56:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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