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Increased consideration for property assets of Fountainhead Property Trust, renewal of cautionary & trading update
Growthpoint Properties Limited
(Incorporated in the Republic of South Africa)
(Registration number 1987/004988/06)
Linked unit code: GRT ISIN ZAE000037669
(“Growthpoint”)
INCREASE IN THE OFFER CONSIDERATION FOR THE PROPERTY ASSETS OF FOUNTAINHEAD
PROPERTY TRUST, RENEWAL OF CAUTIONARY ANNOUNCEMENT AND TRADING UPDATE
Highlights of this announcement
- Growthpoint has increased its Offer from 35 Growthpoint linked units to 37 Growthpoint linked units for
every 100 Fountainhead units and reaffirms its intention to settle or assume Fountainhead’s outstanding
interest bearing debt
- The Revised Offer represents an increase of 5.7% or R605 million above the previous Growthpoint
Offer and a premium of 12.8% to the closing price of Fountainhead units on 19 February 2013
- The Revised Offer also represents a premium of 8.6% or R857 million to the Redefine Offer on 19
February 2013
- Growthpoint has undertaken to provide Fountainhead unitholders with a pricing floor of 35 Growthpoint
linked units per 100 Fountainhead units, which floor equates to a premium of 6.7% to the closing price
of Fountainhead units on 19 February 2013 and a premium of 2.5% to the Redefine Offer on 19
February 2013
- Growthpoint has provided a trading update, increasing its guidance in respect of growth in its
distribution per linked unit for the half year ended 31 December 2012 and for the full year ending 30
June 2013 to between 7.0% and 7.5%
Increase in the offer consideration for the property assets of Fountainhead Property Trust
Growthpoint linked unitholders are referred to the previous announcements released on SENS in relation to the
offer by Growthpoint (the “Offer”) to acquire all of the property assets of Fountainhead Property Trust
(“Fountainhead”).
Growthpoint has continued to engage with the relevant stakeholders of Fountainhead, namely the Financial
Services Board (“FSB”), the Trustee of Fountainhead, being FirstRand Bank Limited, and unitholders of both
Fountainhead and Growthpoint.
Following the aforementioned engagements and the recent announcements released on SENS by
Fountainhead, Growthpoint linked unitholders are advised of the following emanating from a Growthpoint Board
meeting held on 20 February 2013:
1) Growthpoint has submitted to the board of directors of Fountainhead Property Trust Management
Limited (as manager of Fountainhead) (“Manco”) a revised offer to acquire all of the property assets of
Fountainhead (“Revised Offer”) pursuant to the conclusion of a due diligence investigation to the
satisfaction of Growthpoint.
Specifically the salient terms of the Revised Offer include:
a) The Revised Offer ratio is increased from 35 Growthpoint linked units to 37 Growthpoint
linked units for every 100 Fountainhead units in existence at the effective date, representing
an increase of 5.7% or R605 million above the previous Offer, based on clean unit prices for
Growthpoint and Fountainhead on 19 February 2013.
In addition, the Revised Offer ratio, based on clean unit prices for Growthpoint and
Fountainhead, equates to a premium to:
i. the closing price of Fountainhead units on 19 February 2013 of 13%;
ii. the 10 day VWAP of Fountainhead units on 19 February 2013 of 14%; and
iii. the 30 day VWAP of Fountainhead units on 19 February 2013 of 15%.
Lastly, the Revised Offer ratio, based on the closing unit prices for Growthpoint, Redefine
Properties Limited (“Redefine”) and Hyprop Investments Limited (“Hyprop”), and considering
the offer by Redefine as announced on SENS on 13 December 2012 (“Redefine Offer”),
equates to a premium of 8.6% or R857 million above the Redefine Offer on 19 February
2013.
b) i. To the extent that Growthpoint determines in the due diligence investigation that the income
distribution per Fountainhead unit for the financial year ending 30 September 2013 is likely to
be less than the published forecast income distribution per Fountainhead unit of 55.83 cents,
Growthpoint may adjust the Revised Offer ratio downwards by 0.331 Growthpoint linked units
per 100 Fountainhead units for every 0.5 cents by which the income distribution per
Fountainhead unit is less than the forecast, provided that the Revised Offer ratio will not be
adjusted below 35 Growthpoint linked units for every 100 Fountainhead units (the "Minimum
Ratio").
ii. To the extent that Growthpoint determines in the due diligence investigation that the income
distribution per Fountainhead unit for the financial year ending 30 September 2014 is likely to
be less than the published forecast income distribution per Fountainhead unit of 59.85 cents,
Growthpoint may adjust the Revised Offer ratio downwards by 0.309 Growthpoint linked units
per 100 Fountainhead units for every 0.5 cents by which the income distribution per
Fountainhead unit is less than the forecast, provided that the Revised Offer ratio will not be
adjusted below the Minimum Ratio.
iii. To the extent that concerns are identified in the due diligence investigation which are likely
to have an impact on value of greater than 5% (“NAV Difference”) of the reported tangible net
asset value of R8,063 million as at 30 September 2012, Growthpoint may adjust the Revised
Offer ratio downwards by 0.331 Growthpoint linked units per 100 Fountainhead units for every
R92 million of the total Rand value of the NAV Difference, provided that the Revised Offer
ratio will not be adjusted below the Minimum Ratio.
By introducing the Minimum Ratio, Growthpoint is providing a floor to its ability to adjust the
Revised Offer ratio which floor equates to a premium of 6.7% to the closing price of
Fountainhead units on 19 February 2013 and will ensure that Fountainhead unitholders will not
receive less than 35 Growthpoint linked units per 100 Fountainhead units irrespective of the
outcome of the due diligence investigation to be conducted by Growthpoint.
2) Growthpoint reiterates that the terms of the Revised Offer effectively places it in a position where it
accepts the risk that it will not be able to adjust the Revised Offer ratio below 35 Growthpoint linked
units per 100 Fountainhead units even if the outcome of the due diligence investigation to be conducted
by it warrants such an adjustment. Effectively, Fountainhead unitholders have the opportunity to receive
37 Growthpoint linked units per 100 Fountainhead units to the extent that the distribution per
Fountainhead unit is in line with the published forecast income distribution per Fountainhead unit for the
financial years ending 30 September 2013 and 30 September 2014 respectively and they will, at the
very least, receive 35 Growthpoint linked units for every 100 Fountainhead units owned by them,
irrespective of the outcome of the due diligence investigation to be conducted by Growthpoint.
At 35 Growthpoint linked units for every 100 Fountainhead units, the Revised Offer equates to a
material premium above the Redefine Offer, based on the closing unit prices for Growthpoint, Redefine
and Hyprop on 19 February 2013, of 2.5% or R252 million.
The terms of the Revised Offer address the concerns expressed by the Independent Committee and
provide certainty to the Independent Committee and Fountainhead unitholders regarding a minimum
price that they will receive for their Fountainhead units.
3) Growthpoint has considered the announcement released on SENS by Fountainhead on 30 January
2013 setting out, inter alia, the intention to provide Fountainhead unitholders with details of the key
terms and conditions in respect of the proposals from Redefine and Growthpoint and the invitation to
Redefine, Growthpoint, the FSB and the Trustee to provide the Independent Committee with their views
in respect of the proposals for inclusion in the Fountainhead circular.
It is Growthpoint’s understanding, after seeking guidance from the advisors to Fountainhead and the
FSB, that it is intended for Fountainhead unitholders to be provided with comparable information
relating to both offers to enable them to compare the offers and determine which offer to pursue.
Growthpoint is supportive of a process that would see Fountainhead unitholders consider the offers
from both Redefine and Growthpoint and determining which offer to pursue. Such a process demands
that Fountainhead unitholders be put in a position to compare the offers on a comparable basis. This
can only be done if Growthpoint is allowed the opportunity to complete a due diligence investigation
(which will result in finality as to the final offer consideration) and to finalise the terms of an agreement
with Fountainhead before Fountainhead unitholders are polled on the two offers. Growthpoint believes
that this can be achieved expeditiously.
Growthpoint has therefore, in the letter setting out the terms of the Revised Offer, reiterated its request
to be given the opportunity to conduct a due diligence investigation so as to achieve finality around the
final offer consideration and for Fountainhead to disclose details of the threatened litigation so that
Fountainhead unitholders can themselves consider the merits of the threatened litigation. Whilst
Growthpoint has limited insight into the nature of the litigation threatened, it has been advised that such
litigation has limited prospect of being successful.
Growthpoint also understands that several institutional and private Fountainhead unitholders have
made similar requests to Fountainhead and the FSB for Growthpoint to be given the opportunity to
conduct a due diligence investigation.
Trading update
Growthpoint is in the process of finalising its interim results for the six months ended 31 December 2012 and
these results are expected to be published on SENS on 27 February 2013.
Taking into account that the majority of Growthpoint's income is contractual rental, the distribution per linked unit
for the half year ended 31 December 2012 and for the full year ending 30 June 2013 is forecast to be between
7.0% and 7.5% ahead of the distribution per linked unit for the previous comparable period respectively, which is
ahead of guidance previously provided to the market. The forecast distribution per linked unit has been based on
Growthpoint's budgets and projections for the year to 30 June 2013.
The forecast has not been reviewed or reported on by Growthpoint's independent external auditor.
Renewal of cautionary announcement
Further to the cautionary announcement released on SENS on 31 January 2013, Growthpoint linked unitholders
are advised that discussions with various stakeholders of Fountainhead remain in progress.
Accordingly, Growthpoint linked unitholders are advised to continue exercising caution when dealing in their
linked units until a full announcement is made.
21 February 2013
Investment bank Sponsor
Investec Corporate Finance Investec Bank Limited
Legal advisers
Glyn Marais Incorporated
Date: 21/02/2013 08:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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