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REDEFINE PROPERTIES LIMITED - Response to announcement by Growthpoint

Release Date: 22/04/2013 17:31
Code(s): RDF     PDF:  
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Response to announcement by Growthpoint

REDEFINE PROPERTIES LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1999/018591/06)
Share Code: RDF ISIN Code: ZAE000143178
(“Redefine”)


RESPONSE TO ANNOUNCEMENT BY GROWTHPOINT

Growthpoint released an announcement on 17 April 2013 leveling a number of allegations against Redefine and
Fountainhead Property Trust Management Limited (“Fountainhead Manco”).

The central allegations are that Redefine has made consistent threats of litigation against Fountainhead and
Fountainhead Manco; that these threats were without merit or foundation; that the threats caused a conflict between
the interests of Redefine and Fountainhead unitholders and that the conflict still persists.

These allegations have been previously alluded to by Growthpoint, although this is the first time they have been
framed as factual allegations. In Redefine’s opinion, the allegations are entirely unfounded and it will, if this proves
necessary, address them comprehensively in the appropriate forum.

Redefine does, however, consider it appropriate to address directly some of the misconceptions created by the
Growthpoint announcement.

The first is that Redefine’s legal position has no merit or foundation. Redefine has obtained advice from its legal
advisors, which included separate opinions from two senior counsel. The first, from Frank Snyckers SC assisted by
Barry Gilbert, concluded that the Growthpoint proposal was something that lay outside of the administration of the
scheme and that the Manco board was, accordingly, “obliged not to agree to, nor seek to achieve the implementation
of, a transaction that would entail the transfer of its enterprise value from the indirect beneficial ownership of
Redefine to the direct enjoyment of Growthpoint.” The second opinion, from Fanie Cilliers SC, concluded similarly
that the “Growthpoint proposal falls outside of the administration and objects and policy of the scheme.” The legal
advice received has informed Redefine’s conduct throughout the process.

The second is that Redefine has constantly threatened litigation. Redefine has made it clear that it will take all
appropriate steps to protect its rights. However, contrary to Growthpoint’s allegations, Redefine has consistently
sought to avoid litigation. This is not as, Growthpoint alleges, because of a weak legal position, but rather because of
Redefine’s concern that, notwithstanding the advice that it would ultimately be successful, any litigation would be
lengthy and costly and would prejudice both Fountainhead and Redefine, to the benefit of Growthpoint, which has no
investment in Fountainhead and accordingly has little or nothing to lose.

The allegations relevant to the conduct of Fountainhead Manco are best addressed by the Independent Committee,
should it choose to do so. The Independent Committee has at all times been independently advised and has
emphasized previously in its announcements that “all decisions of the Independent Committee in relation to treatment
of the Proposals have been guided by the Independent Committee’s assessment of what is in the best interests of
Unitholders”. As far as Redefine is aware, the Independent Committee has, at all times, acted independently in
accordance with the requirements of CISCA and solely in what it considers to be the best interests of Fountainhead
unitholders.
                                                                                                                       
The announcement states that Growthpoint has sought a ruling from the JSE that Redefine be precluded from voting
on the Growthpoint proposal and on any vote approving an amendment to the trust deed in terms whereof
Fountainhead is constituted ("the Deed"). The JSE has advised Redefine that it notified Growthpoint in writing on
Friday, 19 April that it has declined Growthpoint’s ruling request.

The decision by the JSE is consistent with Redefine’s legal advice (confirmed in an opinion from Frank Snyckers SC
and Barry Gilbert) that there was no basis for the JSE to preclude Redefine from voting against the Growthpoint
proposal. Redefine did not ask counsel to consider whether the JSE could preclude Redefine from voting on a
resolution to amend the Deed as there was, in Redefine’s view, never any rational basis for this contention.
Amendments to the Deed are governed by section 98 of the CISCA and not by the JSE Listing Requirements. CISCA
provides that an amendment to a deed is invalid unless it is consented to by a majority of the investors (by value) in
the manner prescribed in the deed. In terms of paragraph 42, the Deed prescribes a ballot of unitholders in order to
amend the Deed. Accordingly, there was never any resolution on which the JSE could exclude Redefine from voting,
even if it were empowered and inclined to do so. Even the Registrar is barred by CISCA from dispensing with the
requirement for consent of a majority of investors where the amendment would “amend the fundamental provisions or
objects of the deed” as would be required to implement the Growthpoint proposal.

Growthpoint appears to premise its attempt to preclude Redefine from voting in the implicit allegation that Redefine
has acquired its interest in Fountainhead in order to block the Growthpoint proposal and protect the value of its
investment in Fountainhead Manco, as opposed to for a genuine commercial purpose. This is clearly not the case. It
was always Redefine’s intention to make an offer directly to unitholders if for any reason it did not proceed with its
proposal to acquire the Fountainhead assets and this was expressly provided for in Redefine’s amended proposal in
December 2012. In accordance with this intention, Redefine has invested almost R5 billion in acquiring participatory
interests in the underlying Fountainhead assets to share in the income and capital growth from those assets. This
investment decision was informed by Redefine’s views that the Fountainhead assets offer long term upside. By
contrast, Redefine considers Growthpoint units overvalued in current conditions and, accordingly, does not support the
sale of any Fountainhead assets in return for Growthpoint units.

A new allegation in the Growthpoint announcement is Growthpoint’s assertion that Redefine has breached the
Securities Services Act in the manner that it acquired its stake in Fountainhead, which it has asked the FSB to
investigate. Growthpoint was not a party to any of the transactions and again provides no detail in support of its
allegation. Redefine has engaged with the Directorate of Market Abuse at the FSB which has confirmed that a
complaint was lodged on the date of the Growthpoint announcement, but has advised that, in terms of their processes,
they are not allowed to disclose the details which, as at 18 April 2013, they had not yet begun to investigate. Redefine
is satisfied that it has acted lawfully at all times and that, as such, Growthpoint’s allegations are unfounded.

Growthpoint’s agenda is becoming increasingly unclear. Growthpoint has not made an offer to Fountainhead
unitholders. The Growthpoint Proposal is not even an offer to acquire the Fountainhead assets. It is merely a proposal
of the terms on which Growthpoint might be willing to acquire those assets. Fountainhead Manco has advised
Growthpoint that it sees no merit in continuing to engage with it in respect of that proposal. Redefine, by contrast,
made an offer directly to Fountainhead unitholders that enjoyed significant support and has resulted in it holding
approximately 46% of the Fountainhead units, at an investment cost of approximately R5 billion. It was always open
to Growthpoint to make an offer directly to Fountainhead unitholders and it remains so.

Given the lack of foundation to Growthpoint’s allegations, Redefine does not believe it is necessary for Redefine
unitholders to exercise caution when trading their Redefine units.
                




22 April 2013

Sponsor
Java Capital

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