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SYCOM PROPERTY FUND - SYC - Various Corporate Actions and Renewal of Cautionary

Release Date: 28/03/2013 17:40
Code(s): SYC     PDF:  
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SYC - Various Corporate Actions and Renewal of Cautionary

SYCOM PROPERTY FUND
("Sycom" or the "Fund")
A Collective Investment Scheme in Property ("CISP") registered in terms of the Collective Investment
Schemes Control Act, No. 45 of 2002 ("CISCA") and managed by Sycom Property Fund Managers
Limited ("SPFM") (Registration number 1986/002756/06)
JSE share code: SYC
ISIN: ZAE000019303

Announcement in relation to (i) the acquisition of the remaining 50% of the Somerset Mall
Shopping Centre from AECI Pension Fund; (ii) the conclusion of an agreement with Hyprop
Investments Limited ("Hyprop") in respect of various matters, including the disposal of the
Somerset Mall Shopping Centre, a specific repurchase of Sycom participatory interests
("Sycom Units") and the suspension of litigation proceedings; (iii) rights offer declaration in
respect of a fully underwritten renounceable rights offer; (iv) voluntary trading update; and (v)
renewal of cautionary

1. INTRODUCTION

Sycom unitholders ("Unitholders") are referred to the cautionary announcement published by Sycom
on 25 March 2013 and are advised that:

    1.1. SPFM has received an offer from AECI Pension Fund ("APF" and the "APF Offer") to acquire
         the remaining 50% undivided share in the property enterprise known as the Somerset Mall
         Shopping Centre, Western Cape ("Somerset Mall") not already owned by Sycom (the "APF
         Portion") for a cash consideration of R1,15 billion which offer upon acceptance will be subject
         to fulfilment of conditions precedent usual for a transaction of this nature. Sycom intends
         accepting the APF Offer and is in the process of obtaining the approval of FirstRand Bank
         Limited, the Sycom Trustee ("the Trustee") to this. Further details of the APF Offer and the
         resultant acquisition are set out in paragraph 3 below (the "APF Acquisition"). In terms of the
         aggregation rules of the JSE Limited ("JSE") Listings Requirements, the APF Acquisition is a
         Category 1 transaction and is therefore conditional upon Unitholders' approval. A Category 1
         circular will be distributed to Unitholders as referred to below.

    1.2. SPFM has concluded an agreement with Hyprop (full details of which are set out in
         paragraph 4 below) on 28 March 2013 (the "Hyprop Transaction" and "Hyprop Transaction
         Signature Date"), in terms of which, inter alia:
            a. Hyprop will acquire from Sycom, subject to fulfilment of conditions precedent usual for
               a transaction of this nature, the Somerset Mall, comprising:
                      i. the APF Portion; and
                     ii. the remaining 50% undivided share in Somerset Mall currently owned by
                         Sycom (the "Sycom Portion"),
               as a composite acquisition for a total consideration of R2,3billion.
            b. Hyprop will settle the entire consideration by the delivery and transfer to SPFM (on
               behalf of Sycom) of 81,500,000 Sycom Units (comprising approximately 32.8% of the
               total Sycom Units in issue and 97% of Hyprop's holding in Sycom) currently owned by
               Hyprop (the "Consideration Units"), whereafter the Consideration Units will be
               cancelled and their listing terminated. The effective price of each Consideration Unit
               is 2822 cents per Consideration Unit, equivalent to the 30 business day volume-
               weighted average traded price of Sycom Units (the "30 Day VWAP Price") after close
               of trade on the JSE on Wednesday, 27 March 2013;
            c. Hyprop has granted Sycom a right of first refusal over a four-year period to acquire
               the property enterprise known as the Atterbury Value Mart, Faerie Glen, Pretoria
               East;
            d. Hyprop has agreed to suspend the litigation proceedings instituted against the Trustee
               (past and present) of Sycom, SPFM and the JSE in the South Gauteng High Court
               Johannesburg, regarding certain disputed general issues of Sycom Units for cash
               and has agreed to withdraw the litigation proceedings on implementation of the
               Hyprop Transaction and the transfer of the Somerset Mall to it; and
            e. Hyprop has agreed to vote in favour of a ballot of Unitholders (the "Ballot") (the
               relevant documentation to be circulated to all Unitholders as soon as practicable after
               the Registrar of Collective Investment Schemes ("the Registrar") and the Trustee
               have approved the requisite Ballot Circular to Unitholders) to increase Sycom's
               gearing limit to 60% of enterprise value, subject to certain restrictions whilst Hyprop is
               a material Unitholder, as more fully described below.

        Given that Hyprop is a material Unitholder in Sycom, the Hyprop Transaction is regarded as a
        large related party transaction in terms of the JSE Listings Requirements and as such is
        conditional upon the approval of a simple majority of Unitholders being obtained therefor
        (other than Hyprop and its associates', if any, and any other Unitholder excluded from voting
        or the votes of which are not permitted to be counted, pursuant to the JSE Listings
        Requirements).

        In addition, since the consideration is to be settled by the delivery by Hyprop to Sycom of the
        Consideration Units (the "Buy-Back"), the JSE Listings Requirements pertaining to a specific
        repurchase of securities will be applicable to the settlement of the Hyprop Consideration. As
        such, the Buy-Back will require the approval of Unitholders by way of special resolution (as
        contemplated in the Trust Deed) (excluding the votes of Hyprop and its associates, if any,
        given its participation in the repurchase and any Unitholder excluded from voting in respect of
        such resolution in terms of the JSE Listings Requirements) (the "Buy-Back Resolution").

        Subject to the JSE approving its appointment, QuestCo (Pty) Ltd (the "Independent Expert") is
        to be appointed by SPFM to provide a fairness opinion and advise the board of directors of
        SPFM (the "board") on whether the terms of the Hyprop Transaction are fair insofar as
        Unitholders are concerned.

    1.3. Unitholders are further advised that Sycom intends to raise R900 000 002 by way of a fully
         underwritten renounceable rights offer (the "Rights Offer") of 33027 523 new Sycom Units
         (the "Rights Offer Units") to qualifying Unitholders at a subscription price of 2725 cents (the
         "Rights Offer Price") per Rights Offer Unit, at a ratio of entitlement of 13.28519 Rights Offer
         Units for every 100 Sycom Units held on the Rights Offer record date, being Friday, 26 April
         2013 ("Record Date"). Further details of the Rights Offer are set out in paragraph 5 below.

2. RATIONALE FOR THE APF ACQUISITION, THE HYPROP TRANSACTION AND THE RIGHTS
   OFFER

The board believes that facilitating the exit of Hyprop from Sycom in an orderly fashion brings a
number of benefits to Unitholders, including inter alia:
   - the removal of potential limitations and restrictions in Sycom's ability to operate in terms of the
     board's stated strategy;
   - the removal of visible overhang arising from Hyprop's stated non-core' holding;
   - an increase in the institutional free float in Sycom; and
   - the removal of ongoing litigation, with its attendant costs and distraction of management.

The exit of Hyprop from the Sycom Unitholder register and the more flexible gearing limits in Sycom
will permit the board to focus its energies on pursuance of its stated objectives, which are to provide
consistent real growth in distributions per Sycom Unit to Unitholders and to maximise the total return
on investment for Unitholders on a sustainable basis.

However, on a "stand-alone" basis, even if the disposal of the Somerset Mall to Hyprop, pursuant to
the Hyprop Transaction, were not to be implemented for any reason, and Sycom simply acquires the
APF Portion in terms of the APF Acquisition, the acquisition of the APF Portion is in line with Sycom's
strategy to acquire further interests in existing co-owned assets within its portfolio. Sycom's long-
standing involvement in the management of Somerset Mall and detailed understanding of the asset
minimises the transaction risk inherent in the APF Acquisition. The purchase price of R1.15 billion
equates to a capital value of 34682 cents] per square metre, and a first year valuation yield of 6.5%
as at 1 April 2013, in line with recent comparable market transactions. The valuation yield at the
Effective Date is expected to be in the order of 6.7%.

The Rights Offer is required to place Sycom in sufficient funds to execute the APF Acquisition, which
is to be implemented prior to the disposal of the Somerset Mall to HypropThe underwritten nature of
the Rights Offer provides certainty of funding for the proposed APF Acquisition. The Ballot is
necessary to raise the gearing limit in anticipation of the Hyprop Transaction, which when
implemented will result in Sycom's gearing increasing to 33%. This is higher than its current limitation
of 30%.

3. TERMS OF THE APF ACQUISITION

In terms of the APF Agreement, Sycom will acquire the APF Portion from APF, with effect from the
date of transfer of the APF Portion to it, for a cash consideration of R1,15 billion. The consideration
will be funded using the proceeds of the Rights Offer and Sycom's loanfacilities in compliance with the
gearing limitations prescribed in the Trust Deed.

The APF Acquisition is subject to fulfilment (or waiver, where appropriate) of the following conditions
precedent:
    -  SFPM satisfying itself as to the results of a due diligence investigation on the APF Portion,
       within 30 days from the date of exercise of the APF Offer ("APF Acquisition Date of
       Signature");
    -  the relevant regulatory approvals, including, to the extent necessary, the Registrar and the
       Competition Authorities, within 70 business days from the APF Acquisition Date of Signature,
       although the Competition Authorities can extend this date, in their discretion; and
    -  the approval of Unitholders, by the later of 70 business days after the APF Acquisition Date of
       Signature and all regulatory approvals have been obtained.

4. TERMS OF THE HYPROP TRANSACTION

The disposal
After taking transfer of the APF Portion from APF, Sycom is disposing of the Somerset Mall to Hyprop for a
consideration of R2,3 billion (the "Hyprop Consideration") with an effective date of the later of 
1 October 2013 or the first day of the calendar month immediately following fulfilment of the conditions
precedent (the "Effective Date").

Settlement of the Hyprop consideration
The Hyprop consideration for the Somerset Mall is to be settled by the delivery and transfer by
Hyprop to Sycom of 81,500,000 Sycom Units. Both in terms of CISCA and the JSE Listings
Requirements, this is regarded as a repurchase and as such is subject to the provisions of the JSE
Listings Requirements applicable to a specific repurchase. 

The Consideration Units are being transferred to Sycom at an effective price of 2822 cents per
Sycom Unit which is equal to the 30 Day VWAP Price for the 30 business day period ended after
close of trade on the day immediately preceding publication of this announcement on SENS,
Wednesday, 27 March 2013, of 2821.546 cents.

Hyprop will be entitled to receipt of the normal Sycom distribution on the Consideration Units up until
the Sycom distribution period ending 30 September 2013. If transfer does not occur on 1 October, in
respect of the period between 1 October 2013 and the Effective Date, an amount will be payable to Hyprop
in compensation for giving up the applicable distribution, of R13 million per month until the Effective Date.

Sycom will be entitled to all income derived from the Somerset Mall until the Effective Date (excluding
any income from the APF Portion prior to transfer thereof to Sycom).

Conditions precedent to the Hyprop Transaction
The Hyprop Transaction is subject to, inter alia, the fulfilment or waiver, where appropriate, of the
following conditions precedent, which must all be fulfilled or waived by no later than 31 March 2014:

- the Trustee approving and ratifying the Hyprop Transaction, by not later than 20 (twenty)
  business days from the Hyprop Transaction Signature Date and granting any other
  approvals required for implementation of the Hyprop Transaction, by 30 August 2013;

- Hyprop completing a due diligence investigation to its satisfaction on the Somerset Mall
  by the later of 30 (thirty) business days after the Hyprop Transaction Signature Date or
  15 (fifteen) business days after Hyprop has been afforded access to all relevant and
  material books, records and other documentation;

- Sycom attaining Real Estate Investment Trust status by 30 August 2013;

- the APF Offer being exercised and the APF Agreement becoming unconditional
  according to its terms and the APF Portion being registered in the name of Sycom. In
  terms of the APF Acquisition Agreement, transfer will occur as soon as possible after the
  later of 70 business days after the APF Acquisition Date of Signature and all regulatory
  approvals have been obtained;

- a fairness opinion as required in terms of the JSE Listings Requirements, being obtained
  from the Independent Expert, by 30 August 2013;

- Unitholders approving the sale of the Somerset Mall to Hyprop and the Buy-Back, as a
  large related party transaction and a specific repurchase, respectively, in terms of the
  JSE Listings Requirements, by 30 August 2013;

- all the requisite approvals and consents, including the approval of Unitholders, to the
  amendment of the Trust Deed having been obtained to increase the gearing limit of 30%
  to 60%, by 30 August 2013; and

- the approval of the Competition Authorities, by 31 March 2014.

Undertaking to vote in favour of the Ballot
Hyprop has undertaken to vote in favour of the Ballot for the increase of Sycom's gearing limit. This
approval is subject to the proviso that until transfer of the Somerset Mall to Hyprop the
30% gearing level will not be exceeded, without Hyprop's approval, except as necessary for the
implementation of the Hyprop Transaction, the exercise of any pre-emptive rights available to Sycom
and the upgrade of or improvements to the Vaal Mall. This is consistent with the long-term strategy of
the SPFM board to generally maintain gearing at a level below 40%, and only to exceed this level as
a result of the temporary effects of specific transactional activity.

Hyprop disposal of Sycom Units other than the Sycom Consideration Units
Subject to the Hyprop Transaction becoming unconditional, Hyprop has agreed that within 150 (one
hundred and fifty) days of the Effective Date, it will have disposed of the remainder of its Sycom Units 
2 725 688 Sycom Inits) together with any additional Sycom Units issued to the Hyprop to the extent that Hyprop
exercises its rights in terms of the Rights offer.

Information relating to the Somerset Mall
In compliance with section 13.19 of the JSE Listings Requirements, the following information is
disclosed in relation to the Somerset Mall:

-  the Somerset Mall is located in Somerset West and has a GLA of 66,317 square metres;
-  The weighted average rental per square metre for the GLA is R186.90;
-  No agent's commission is payable in respect of the APF Acquisition;
-  The latest valuation of the Sycom Portion reflected a valuation as at 1 April 2013 of
   R1,137,500,000. The valuation report, as well as details of transfer and other applicable
   costs, will be included in the circular to Unitholders referred to below.

5. TERMS OF THE RIGHTS OFFER

Sycom intends to raise R900 000 002 by way of a fully underwritten renounceable Rights Offer of the
Rights Offer units comprising 33 027 523 new Sycom Units to qualifying Unitholders at the Rights
Offer Price, being a subscription price of 2725 cents per Rights Offer Unit, at a ratio of entitlement of
13.28519 Rights Offer Units for every 100 Units held on the Rights Offer Record Date, being Friday,
26 April 2013. The Rights Offer Price represents a discount of approximately 2.1% to the 30 business
day VWAP at (and including) 8 March 2013, being the last JSE trading day before the Rights Offer
was approved by the board and a discount of 3.4% to the 30 business day VWAP after close of trade
on Wednesday, 27 March 2013. The Rights Offer Price has been calculated on the basis that the
Rights Offer Units will qualify for the full distribution in respect of the six months ending 31 March
2013 and the six months ended 30 September 2013, notwithstanding the date of the allotment and
issue of such Rights Offer Units. The Rights Offer Price accordingly includes an antecedent
divestiture of distribution of 105.67 cents, being an estimate of the distribution per Sycom unit that will
be paid for the six-month period 1 October 2012 to 31 March 2013 of 90.57 cents and a pro rata
portion (for the 1 month ending 30 April 2013) of the estimated distributable income per Sycom unit
for the six month period ending 30 September 2013, of 15.10 cents. This estimate has not been
reviewed by or reported on by Sycom's external auditors. This is in order to ensure that the
Rights Offer does not dilute Sycom's distribution to existing Unitholders for the period in question. The
amount received in respect of antecedent distributions will be recognised as income to Sycom.

The Rights Offer is not conditional upon any minimum subscription being received, and excess
applications for Rights Offer Units will be permitted. Any or all excess applications will be allocated in
an equitable manner, taking cognisance of the number of Sycom Units held by each applicant prior to
such allocation (including those taken up as a result of the Rights Offer) and the number of Rights
Offer Units for which application is made. The issued Rights Offer Units will rank pari passu with
existing Sycom units. Only whole numbers of Sycom Units will be issued and Unitholders will be
entitled to subscribe for rounded numbers of Sycom units once the ratio of entitlement has been
applied. Fractional entitlements of 0.5 or greater will be rounded up and fractional entitlements of less
than 0.5 will be rounded down.

Unitholder commitments and underwriter

Acucap is a holder of 19.58% of the Sycom units currently in issue and is the sole shareholder in
SPFM and has, in order to facilitate the capital raising and ensure its success, provided a written
undertaking to follow its rights in terms of the Rights Offer to subscribe for 6 467 038 Rights Offer
Units, representing 19.58% of the total Rights Offer Units available.

In addition to the commitment to follow its rights, Acucap has also fully underwritten the Rights Offer
for no underwriting fee or consideration.

Foreign Unitholders

Any Unitholder resident outside the common monetary area who/which receives the Rights Offer
circular and form of instruction should obtain advice as to whether any governmental and/or any other
legal consent is required and/or any other formality must be observed to enable a subscription to be
made in terms of the form of instruction.

The Rights Offer does not constitute an offer in any jurisdiction in which it is illegal to make such an
offer and the Rights Offer circular and form of instruction should not be forwarded or transmitted by
recipients thereof to any person in any territory other than where it is lawful to make such an offer.

The Rights Offer Units have not been and will not be registered under the Securities Act of the United
States of America ("USSA"). Accordingly, the Rights Offer Units may not be offered, sold, resold,
delivered or transferred, directly or indirectly, in or into the United States or to, or for the account or
benefit of, United States persons, except pursuant to exemptions from the USSA. The Rights Offer
circular and the accompanying documents are not being, and must not be, mailed or otherwise
distributed or sent in, into or from the United States. The Rights Offer circular does not constitute an
offer of any securities for sale in the United States or to United States persons.

The Rights Offer contained in the Rights Offer circular does not constitute an offer in the District of
Colombia, the United States, the Dominion of Canada, the Commonwealth of Australia, Japan or in
any other jurisdiction in which, or to any person to whom, it would not be lawful to make such an offer.
Non-qualifying Unitholders should consult their professional advisers to determine whether any
governmental or other consents are required or other formalities need to be observed to allow them to
take up the Rights Offer, or trade their entitlement.

Unitholders holding Units on behalf of persons who are non-qualifying Unitholders are responsible for
ensuring that taking up the Rights Offer, or trading in their entitlements under that offer, do not breach
regulations in the relevant overseas jurisdictions.

To the extent that non-qualifying Unitholders are not entitled to participate in the Rights Offer as a
result of the aforementioned restrictions, the allocated rights in respect of such non-qualifying
Unitholders shall revert to Sycom who shall be entitled to sell or place same or failing which such
rights will lapse.

Salient dates and times of the Rights Offer                                                               
                                                                                                         2013   
Last day to trade in Sycom Units in order to qualify for participation in the Rights         Friday, 19 April   
Offer (cum entitlement)                                                                                   
Listing of letters of allocation on the JSE at commencement of trading                       Monday, 22 April   
Units commence trading ex-rights on the JSE at commencement of trading                       Monday, 22 April   
Record Date for participation in the Rights Offer at the close of trade                      Friday, 26 April   
Circular and form of instruction posted to Unitholders, where applicable                     Monday, 29 April   
Rights Offer opens at commencement of trading                                                Monday, 29 April   
Dematerialised Unitholders' accounts at their Central Securities Depository Participant         
("CSDP") or broker automatically credited with their entitlement                             Monday, 29 April   
Certificated Unitholders' entitlements will be credited to an account held with the             
transfer secretaries                                                                         Monday, 29 April   
Last day to trade in letters of allocation on the JSE                                          Friday, 17 May   
Last day for form of instruction to be lodged with the transfer secretaries by                    
certificated Unitholders wishing to sell all or part of their Rights Offer entitlement by                       
12h00 on                                                                                       Friday, 17 May   
Listing of Rights Offer Units subscribed for at commencement of trading                        Monday, 20 May   
Rights Offer closes  payments to be made and form of instruction in respect of                   
letters of allocation to be lodged by certificated Unitholders by 12h00                        Friday, 24 May   
Record date for letters of allocation                                                          Friday, 24 May   
Dematerialised Unitholders' accounts updated with entitlements and debited by their               
CSDP or broker and certificates posted to certificated Unitholders on or about (see                             
note 5)                                                                                        Monday, 27 May   
Results of Rights Offer announcement published on SENS on or about                             Monday, 27 May   
Dematerialised Unitholders' accounts updated with excess Rights Offer Units                    
allocated (where applicable) and debited by their CSDP or broker and certificates                               
posted to certificated Unitholders in respect of excess Rights Offer Units allocated                            
(where applicable) on or about                                                              Wednesday, 29 May    

Notes:
1.   Dematerialised Unitholders are required to notify their duly appointed CSDP, banker or broker of their acceptance or
     otherwise of the Rights Offer in the manner and time stipulated in the agreement governing the relationship between such
     Unitholders and their CSDP, banker or broker.
2.   All times indicated are South African times and are subject to change. Any such changes will be published on SENS.
3.   Unit certificates may not be dematerialised or rematerialised between Monday, 22 April 2013 and Friday, 26 April 2013,
     both days inclusive.
4.   The CSDP or broker accounts of dematerialised Unitholders will be automatically credited with new units to the extent to
     which they have accepted the Rights Offer. Unit certificates will be posted, by registered post at the Unitholders' risk, to
     certificated Unitholders in respect of the Rights Offer Units which have been accepted.
5.   CSDPs or brokers shall effect payment in respect of dematerialised Unitholders on a delivery versus payment method.

6. TRADING UPDATE

The board of SPFM re-affirms the guidance provided in Sycom's interim results announcement dated
15 November 2012 for the six months ended 30 September 2012, in terms of which Unitholders were
advised that distribution growth for the full year ending 31 March 2013 will be in the order of 5%.
Taking into account first half distribution growth of 4.2%, the board expects distributions to increase
by just under 6% in the second half of the current financial year compared to the same period in the
prior year.

The above information has not been reviewed or reported on by Sycom's auditors.

7. FURTHER DOCUMENTATION, TIMETABLE APPLICABLE TO THE APF TRANSACTION AND HYPROP TRANSACTION, BALLOT FOR INCREASE OF 
   GEARING LIMITS, PRO FORMA FINANCIAL EFFECTS AND RENEWAL OF CAUTIONARY

A Rights Offer circular containing full details of the terms of the Rights Offer and a form of instruction
in respect of a letter of allocation will be posted on or about Monday, 29 April 2013 to all Unitholders
recorded in the register as such on the Record Date.

The APF Acquisition is a Category 1 transaction in terms of the aggregation provisions of the JSE
Listings Requirements and as such, will be subject to Unitholders voting in favour thereof. In addition,
the Hyprop Transaction is a large related party transaction incorporating a specific repurchase and
accordingly will also be subject to Unitholders voting in favour thereof. Transaction circulars will be
prepared and circulated to Unitholders in due course.

Further announcements, including pro forma financial effects of the Rights Offer, the APF Acquisition
and the Hyprop Transaction, together with a corporate actions timetable in relation to the APF
Acquisition and the Hyprop Transaction, will be published in due course.

In light of the above, Unitholders are advised to exercise caution in dealing in their Sycom Units until a
further announcement including abovementioned pro forma financial effects and the outcome of the
independent expert's fairness opinion is published.

Cape Town
28 March 2013

Sponsor, Corporate Advisor and Investment Bank
ABSA BANK LIMITED 
(acting through its Corporate and Investment Banking Division)
Member of 
BARCLAYS

Legal advisor
DLA CLIFFE DEKKER HOFMEYR

Transaction Sponsor and Corporate
Advisor on the Rights Offer and
Independent Expert on the Hyprop
Transaction
QUESTCO

Independent reporting
accountants and auditors
KPMG

Competition Law Advisors
VUNANI CHETTY
Date: 28/03/2013 05:40:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
 the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, 
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
 information disseminated through SENS.

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