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Acquisition of Somerset Mall, cancellation of Sycom units, suspension of Sycom litigation withdrawal of cautionary
HYPROP INVESTMENTS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1987/005284/06)
Share code: HYP ISIN: ZAE000003430
(“Hyprop” or “the company”)
ACQUISITION OF SOMERSET MALL, CANCELLATION OF SYCOM UNITS, SUSPENSION OF
SYCOM LITIGATION AND WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
1. Introduction
1.1. Unitholders are referred to the cautionary announcement dated 25 March 2013 pursuant to which
unitholders were advised that –
1.1.1. Hyprop and Sycom Property Fund (“Sycom”), through its manager Sycom Property Fund
Managers Limited (“SPFM”), were engaged in discussions regarding Hyprop’s
investment in Sycom;
1.1.2. any agreement resulting from those discussions would involve the current litigation being
withdrawn on the basis of a mutually acceptable settlement being reached.
1.2. Unitholders are also referred to the announcement of Sycom dated 28 March 2013 in which Sycom
unitholders were advised that SPFM has received an offer from AECI Pension Fund (“APF”) (the “APF
Offer”) to acquire the remaining 50% undivided share in the property enterprise known as 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 that nature, including Sycom unitholders’
approval (the “APF Agreement”). Sycom has indicated its intention to accept the APF Offer and is in
the process of obtaining the approval of FirstRand Bank Limited, the Sycom trustee (the “Trustee”) to
this effect.
1.3. Unitholders are advised that SPFM and Hyprop have concluded an agreement dated 28 March 2013
(the “sale agreement”) in terms of which, inter alia, –
1.3.1. conditional upon the implementation of the APF Agreement, Hyprop will acquire 100%
of Somerset Mall from Sycom for a purchase consideration of R2.3 billion, which
purchase consideration will be discharged by Hyprop transferring to SPFM (on behalf of
Sycom) 81 500 000 Sycom units (the “Consideration Units”) (comprising approximately
32.8% of the total Sycom units in issue);
1.3.2. the court application initiated by Hyprop and referred to in the SENS announcement
issued by Sycom and dated 14 November 2012 will be suspended.
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2. Somerset Mall acquisition
2.1. Hyprop has concluded a sale agreement with SPFM in terms of which Sycom sells to Hyprop Somerset
Mall for a purchase consideration of R2.3 billion (the “transaction”).
2.2. The forecast income of Somerset Mall for the 12 month period commencing 1 October 2013 equates to
an approximate 6.7% yield on the purchase consideration.
2.3. The purchase consideration for Somerset Mall will be discharged by Hyprop transferring the
Consideration Units to SPFM (on behalf of Sycom) against registration of the Somerset Mall property
into the name of Hyprop (the “transfer date”). The number of Consideration Units has been determined
so that the income which Hyprop will forego on the disposal of the Consideration Units will be equal to
the forecast net rental from Somerset Mall for the 12 month period commencing 1 October 2013. The
notional value attributed to each of the Consideration Units for the purposes of the transaction equates
to a clean price of R28,22 per Sycom unit.
2.4. The effective date of the transaction (the “effective date”) is the later of –
2.4.1. 1 October 2013; and
2.4.2. the first day of the calendar month following the month in which the sale agreement
becomes unconditional.
2.5. The Consideration Units will be transferred to SPFM (and cancelled) ex the entitlement to any
distribution declared and/or paid by Sycom in respect of the Sycom distribution cycle up to and
including 30 September 2013, on the basis that Hyprop will be entitled to such distributions
notwithstanding that such Consideration Units may have been transferred to Sycom and cancelled on
the date for determining Sycom unitholders entitlement to participate in the relevant distribution.
Notwithstanding that Hyprop may not be the registered holder of the Consideration Units at the relevant
time, Sycom shall make an income payment to Hyprop in respect of the Consideration Units as if
Hyprop had been the registered owner thereof on the record date for the relevant distribution.
Conversely, with effect from Sycom’s distribution period commencing on 1 October 2013, Hyprop
shall not be entitled to any distribution from the Sycom units comprising the Consideration Units and
has ceded any claims which it may have in respect of such distributions to Sycom.
If the effective date is later than 1 October 2013, then with effect from 1 October 2013 to the effective
date, Sycom shall pay to Hyprop in lieu of and in compensation for ceding its rights to all or portion of
the normal Sycom distribution in respect of Sycom’s distribution period commencing on 1 October
2013, an amount of R13 million per calendar month.
2.6. The court application referred to in the announcement issued by Sycom dated 14 November 2012 has
been suspended such that Sycom or any other respondent will not be required to file an affidavit in the
matter or take any other steps that may be required in respect of the court application, unless and until
the sale agreement has failed. Within 3 business days after the transfer date, Hyprop will withdraw the
court application.
2.7. Hyprop (as part of the overall transaction) will acquire 100% of the equity in the management company
(Somerset Mall Property Management Company Proprietary Limited (the “Somerset Mall Property
Manco”)) which manages Somerset Mall. The equity in this entity will be acquired for a nominal
consideration of R100,00.
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2.8. Hyprop will dispose of the remainder of its Sycom units (currently 2 725 688 Sycom units) within a
period of 150 days after the effective date.
3. Conditions precedent to the Somerset Mall acquisition
The transaction is subject to certain conditions precedent including, inter alia:
3.1. all regulatory approvals required for the transaction (including without limitation the repurchase by
Sycom of the Consideration Units) being obtained by the requisite majority of Sycom unitholders and,
to the extent required, from the Trustee;
3.2. the boards of each of SPFM and Hyprop approving the transaction;
3.3. the conclusion by Hyprop to its satisfaction of a due diligence investigation in respect of Somerset Mall
and the Somerset Mall Property Manco;
3.4. the transaction being unconditionally approved by the Competition Authorities;
3.5. all requisite approvals and consents to the amendment of the Sycom trust deed being obtained to
increase Sycom’s gearing limit of 30% to 60%;
3.6. approval being obtained by the JSE Limited that Sycom has been approved as a Real Estate Investment
Trust;
3.7. a fairness opinion on whether the terms of the transaction are fair insofar as Sycom unitholders are
concerned, as is required in terms of the JSE Listings Requirements, being obtained by the board of
directors of SPFM from an independent expert appointed by SPFM for that purpose;
3.8. 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.
4. Right of first refusal over Atterbury Value Mart
Hyprop has granted Sycom certain pre-emptive rights to acquire Atterbury Value Mart, should Hyprop elect to
dispose of Atterbury Value Mart within four years.
5. Rationale for the transaction
Hyprop initially acquired a strategic interest in Sycom in 2007 and currently holds 84 225 688 Sycom
units representing 33.9% of the Sycom units in issue. Hyprop’s stated strategy is to invest in high
quality, sizable shopping centres.
The successful conclusion of this transaction will enable Hyprop to convert its investment in listed
property securities to an investment in a sizable regional shopping centre, which will form part of
Hyprop’s core assets. Hyprop is confident that by applying its experienced internal management skills
it will be able to extract value from Somerset Mall over the long-term to the benefit of its unitholders.
6. Somerset Mall
Somerset Mall is a regional shopping mall serving the greater Somerset West node including Somerset
West, Strand, Stellenbosch, Gordons Bay, Macassar and surrounding areas. The shopping centre is
anchored by Pick n Pay (7 280 m2), Game (5 500 m2), Woolworths (6 002 m2), Edgars (4 001 m2),
Dion Wired (2 370 m2), Dischem (1 448 m2), together with a full complement of national fashion
retailers, line shops, lifestyle stores and banks.
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The property specific information in relation to Somerset Mall including property name and address,
sector, geographical location, rentable area and weighted average rental is set out below.
Property Address Sector Geographical Rentable Weighted
Name Location Area average
m2 rental per
m2
R/ m2
Somerset Mall Cnr N2 & Retail Somerset West, 66 317 186,90
R44 Western Cape
Highways,
Somerset
West
The board of Hyprop is satisfied that the value of Somerset Mall for the purpose of the transaction is in
line with the purchase price. A valuation of Somerset Mall has not been undertaken at the instance of
the Hyprop board by an independent professional valuer.
7. Categorisation of the transaction
The acquisition of Somerset Mall by Hyprop will be classified as a Category 2 transaction for Hyprop
in terms of the JSE Listings Requirements and accordingly will not require the approval of Hyprop
unitholders.
8. Financial effects
The impact of the transaction on Hyprop’s net asset value, net tangible asset value, distribution, earnings,
headline earnings, diluted earnings and diluted headline earnings per combined unit is not significant (less than
3%) and therefore has not been disclosed.
9. Withdrawal of cautionary announcement
Unitholders are no longer required to exercise caution when dealing in their Hyprop combined units.
28 March 2013
Corporate advisor, legal advisor and sponsor
Java Capital
Date: 28/03/2013 05:41:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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