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Withdrawal of proposal to acquire Fountainhead portfolio, acquisition of significant stake in Fountainhead, offer to
REDEFINE PROPERTIES LIMITED
(Incorporated in the Republic of South Africa)
(Registration No. 1999/018591/06)
Share Code: RDF ISIN Code: ZAE000143178
(“Redefine”)
WITHDRAWAL OF PROPOSAL TO ACQUIRE FOUNTAINHEAD PORTFOLIO, ACQUISITION
OF SIGNIFICANT STAKE IN FOUNTAINHEAD, OFFER TO FOUNTAINHEAD UNITHOLDERS
AND FURTHER CAUTIONARY ANNOUNCEMENT
INTRODUCTION
Redefine has advised the board of Fountainhead Property Trust Management Limited (“Fountainhead Manco”) that it
has resolved not to proceed with its proposal to acquire the property portfolio of Fountainhead Property Trust
(“Fountainhead”).
Redefine announced the acquisition of Fountainhead Manco during March 2012, at which time it also announced its
intention to acquire the assets of Fountainhead, failing which it would continue to manage and administer
Fountainhead through Fountainhead Manco. This was the basis on which Redefine sought, and obtained, approval
from the Registrar of Collective Schemes (“Registrar”) for the acquisition of Fountainhead Manco.
The formulation of the Growthpoint offer, and the manner in which it has been dealt with by the independent
committee of the Fountainhead Manco board and by the Fountainhead trustee, has caused protracted delays and
uncertainty. The result of this is, that some 12 months after Redefine’s initial announcement (and despite agreement
having been reached on all material terms of a sale agreement between Redefine and the independent committee
during the exclusivity period granted specifically for this purpose), the process is still several months from
completion.
As Redefine has for some time feared, the uncertainty is now having a significant detrimental impact on
Fountainhead’s assets and day-to-day business. Three key staff members have resigned. Negotiations with potential
tenants, particularly in relation to proposed redevelopments, are being complicated and delayed, key decisions around
capital expenditure and the like are not being made with the urgency required and significant advisory costs are being
incurred.
Redefine has concluded that it is necessary to take decisive action in order to protect and safeguard the interests of
Fountainhead, Fountainhead unitholders and Redefine (as owner of Fountainhead Manco) and to allow the board to
focus fully on the active management and administration of Fountainhead.
ALIGNMENT OF INTERESTS AND OFFER TO FOUNTAINHEAD UNITHOLDERS
As announced previously Redefine resolved some time ago that, if its proposal to acquire the assets of Fountainhead
was not successful, it would seek to obtain a meaningful stake in Fountainhead in order to ensure a further alignment
of interests between Redefine and the Fountainhead unitholders.
In pursuit of this strategy Redefine has acquired approximately 18% of the Fountainhead units, making it the largest
Fountainhead unitholder. Redefine intends, on an accelerated basis, to offer to acquire further Fountainhead units on
the following basis:
- Redefine will acquire up to 175 million additional Fountainhead units (in tranches of not less than 1 million)
in return for 12.15 Hyprop units for every 100 Fountainhead units sold;
- Fountainhead units will be accepted on a ‘first come first served’ basis and the offer remains open for
acceptance until the earlier of the offer being filled or the close of business on 12 March 2013.
Redefine reserves the right, at its election, to extend the period of the offer, withdraw the offer at any time and/or
acquire additional Fountainhead units. Any Fountainhead unitholders interested in accepting the offer should contact
Warren Lawlor or Andrew Brooking on (011) 283 0042 or by e-mail on fountainhead@javacapital.co.za.
MANAGEMENT AND ADMINISTRATION OF FOUNTAINHEAD
Redefine has decided to bolster the executive capacity and property experience on the Fountainhead Manco board, in
line with the Registrar’s requirements and in order to ensure that the board is able to deal proactively and urgently
with the challenges facing Fountainhead and its portfolio.
In this regard Redefine has appointed 3 executive directors, Marc Wainer, David Rice and Mike Lewin, to the board
of Fountainhead Manco. In order to ensure the retention of an appropriate balance between executive and
(independent and non-independent) non-executive directors, Redefine has also appointed Mr Lyndon Kan to the board
as an independent non-executive director.
Redefine is confident that the appointments (all of which are subject to the requisite approval of the Registrar) will
significantly strengthen the board’s executive capacity and property experience.
THE GROWTHPOINT PROPOSAL
Redefine’s legal advice (confirmed independently by two senior counsel) has consistently been that:
- the Growthpoint offer (or any similar proposal) lies outside of the administration of Fountainhead and that,
accordingly, the Fountainhead Manco board is obliged not to entertain, agree to or seek to implement such a
proposal; and
- Redefine is in a position to block the Growthpoint offer or any similar proposal.
Redefine has also consistently stated that it will, if required, take all appropriate and available steps to protect the
value of its equity in Fountainhead Manco.
Having regard to that fact that, as far as we are aware, the South African Courts have never granted an order winding
up a Collective Investment Scheme in Property where the winding up was not supported by a special resolution of
unitholders, and would be unlikely to depart from this principle in a contentious matter, the extent of Redefine’s
unitholding means that there is no longer any practical likelihood that the Growthpoint proposal can succeed, ignoring
the legal shortcomings of the Growthpoint proposal.
Redefine expects the Fountainhead Manco board to act decisively to end the current uncertainty by withdrawing from
its engagements with Growthpoint and trusts that it will not continue to incur significant advisory costs to the
detriment of Fountainhead unitholders in considering a proposal that has no reasonable prospect of being
implemented.
FURTHER CAUTIONARY ANNOUNCEMENT
The acquisition by Redefine of a stake in Fountainhead will constitute a category 2 transaction requiring a category 2
announcement including financial effects. Redefine unitholders are advised to continue to exercise caution when
trading their Redefine units until a further announcement is made.
Johannesburg
11 March 2013
Corporate advisor and sponsor
Java Capital
Legal advisor
Cliffe Dekker Hofmeyr Inc.
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