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GROWTHPOINT PROPERTIES LIMITED - Specific Repurchase and Dealing in Securities by a Director

Release Date: 28/06/2013 16:30
Code(s): GRT     PDF:  
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Specific Repurchase and Dealing in Securities by a Director

Growthpoint Properties Limited
(Incorporated in the Republic of South Africa)
(Registration number 1987/004988/06)
Linked unit code: GRT ISIN ZAE000037669
(“Growthpoint”)



ACQUISITION BY THE GROWTHPOINT STAFF INCENTIVE SCHEME TRUST (“GSIST”) AND
GROWTHPOINT MANAGEMENT SERVICES (PTY) LIMITED (“GMS”) OF 16,500,000
GROWTHPOINT LINKED UNITS FOR AN AGGREGATE PURCHASE CONSIDERATION OF
R354,750,000 AND DEALING IN SECURITIES BY A DIRECTOR



1. BACKGROUND TO THE SPECIFIC REPURCHASE

  In December 2006, Growthpoint concluded a Broad-based Black Economic Empowerment
  (“BBBEE”) transaction with Phatsima, a BBBEE entity, in terms of which Phatsima Properties
  Proprietary Limited (“Phatsima”), through Meadowood Investments 11 Proprietary Limited
  ("Meadowood") and Canyon Springs Investments 25 Proprietary Limited ("Canyon Springs")
  (together “the SPV’s”), acquired 22,000,000 Growthpoint linked units, representing 2.3% of the total
  linked units in issue at the time. At that time, Growthpoint, Phatsima and the SPV’s also entered into
  a relationship agreement ("the Relationship Agreement") which provides for a lock-in period of the
  greater of 7 years from the date on which the Relationship Agreement became effective or the date
  on which all debt financing incurred for purposes of acquiring Growthpoint linked units is repaid. After
  the expiry of the lock-in period, Growthpoint retains pre-emptive rights to acquire all of the linked units
  indirectly owned by Phatsima in the event that Phatsima elects to sell any or all of its Growthpoint
  linked units.

  To date, significant value has been created for Phatsima and its shareholders due to the good
  performance of the Growthpoint linked unit price since 2006. However, the original funding structure
  continues to have significant debt exposure to third party funders as well as mezzanine debt facilities
  originally provided by Growthpoint. Following internal deliberations by the board of directors of
  Phatsima, a strategic decision was taken to remove all gearing in the structure by Phatsima agreeing
  to sell down the requisite number of Growthpoint linked units as would be required to repay all debt
  incurred for purposes of acquiring Growthpoint linked units.

  Considering that Phatsima currently remains within the lock-in period as provided for in the
  Relationship Agreement and the fact that Growthpoint retains pre-emptive rights over any sale by
  Phatsima of any of its Growthpoint linked units, GSIST and GMS have agreed, subject to the
  suspensive conditions set out below, to acquire 16,500,000 Growthpoint linked units for an aggregate
  purchase consideration of R354,750,000 which proceeds will be sufficient to allow the SPV’s to repay
  all of the outstanding debt financing incurred for purposes of acquiring Growthpoint linked units.

  Following the successful implementation of the specific repurchase Phatsima will own, through
  Meadowood, 5,500,000 Growthpoint linked units, representing a holding of 0.3% of the total linked
  units in issue, net of linked units held in treasury and will no longer have any debt outstanding in
  connection with its acquisition of this holding.

2. THE GSIST ACQUISITION
  Growthpoint linked unitholders (“Linked Unitholders”) are advised that GSIST has entered into an
  agreement with Phatsima and the SPV's pursuant to which GSIST will acquire 8,000,000 Growthpoint
  linked units at a price of R21.50 per linked unit, amounting to a gross purchase consideration of
  R172,000,000. The purchase price per linked unit represents a discount of 16.9% to the 30 day
  volume weighted average price (“VWAP”) of Growthpoint linked units as at 27 June 2013 and is
  inclusive of any rights to distributions made by Growthpoint in the future.

  The GSIST was established in 2007 as the official employee share trust for all share incentive
  schemes for Growthpoint employees and currently has a liability in respect of options awarded to
  employees of Growthpoint in respect of more than 7 million Growthpoint linked units. The Growthpoint
  linked units being purchased in terms of the GSIST acquisition will be used to hedge the current
  liability of the trust as well as new option awards anticipated to be made in September 2013.

3. THE GMS ACQUISITION

  Linked Unitholders are further advised that GMS, a wholly-owned subsidiary of Growthpoint and the
  entity that employs all of the Growthpoint employees, has entered into an agreement with Phatsima
  and the SPV's pursuant to which GMS will acquire 8,500,000 Growthpoint linked units at a price of
  R21.50 per linked unit, amounting to a gross purchase consideration of R182,750,000. The purchase
  price per linked unit represents a discount of 16.9% to the 30 day VWAP of Growthpoint linked units
  as at 27 June 2013 and is inclusive of any rights to distributions made by Growthpoint in the future.

  The GMS acquisition offers Growthpoint the opportunity to acquire Growthpoint linked units at a
  substantial discount to both the current trading price, as well as the 30 day VWAP, of Growthpoint
  linked units at 27 June 2013. It is Growthpoint’s intention to utilize the linked units purchased
  pursuant to the GMS acquisition to structure a new staff share incentive scheme which would have
  the objective of incentivizing and retaining Growthpoint staff over the longer term.

4. SPECIFIC REPURCHASE FROM A RELATED PARTY

  As GMS will be acquiring linked units directly from Meadowood at a pre-determined price, the
  purchase of such linked units constitutes a specific repurchase ("Specific Repurchase") as defined
  in the JSE Listings Requirements ("Listings Requirements").

  In terms of the Listings Requirements, Phatsima is deemed to be a related party to Growthpoint which
  arises as a result of Mr. Herman Mashaba being a director of Growthpoint and an associate of
  Phatsima and Meadowood.

  However, in accordance with the Listings Requirements, the Specific Repurchase is to be
  implemented at a discount to the 30 day VWAP, and therefore a fairness opinion will not be required.

5. SUSPENSIVE CONDITIONS

  The Specific Repurchase is subject to fulfillment of the suspensive conditions that:

     i. the security to which the linked units indirectly owned by Phatsima is subject shall have been
        released;
    ii. the shares constituting the linked units indirectly owned by Phatsima shall have been
        transferred by Canyon Springs to Meadowood; and

   iii. the special resolution approving the Specific Repurchase shall have been duly passed by
        Linked Unitholders at a general meeting of Growthpoint in accordance with the Companies Act,
        No. 71 of 2008 and the Listings Requirements.

6. UNAUDITED AND UNREVIEWED PRO FORMA FINANCIAL EFFECTS OF THE PROPOSED
   BBBEE TRANSACTION

  The unaudited and unreviewed pro forma financial effects (“pro forma financial effects”) of the
  Specific Repurchase of linked units, the calculation of which is the responsibility of the Growthpoint
  board of directors, are provided for illustrative purposes only to provide information about how the
  Specific Repurchase will affect the financial position of Linked Unitholders by illustrating the effect
  thereof on the earnings per linked unit, headline earnings per linked unit and distributable earnings
  per linked unit as if the Specific Repurchase had been implemented on 30 June 2012 and, for the
  purpose of net asset value per linked unit (“NAV”) and tangible net asset value per linked unit
  (“TNAV”) of Growthpoint, as if the Specific Repurchase had been implemented on 31 December
  2012.

  Because of their nature, the pro forma financial effects may not give a fair presentation of
  Growthpoint’s financial position, changes in equity, results of operations, cash flow and performance
  after the Share Repurchase. The pro forma financial effects have been compiled using accounting
  policies that comply with International Financial Reporting Standards and are consistent with those
  applied in the audited consolidated financial statements of Growthpoint for the twelve months ended
  30 June 2012. There are no post balance sheet events which require adjustment to the pro forma
  financial effects.

                                                          Before the        After the
                                                                                                %
                                                           Specific         Specific
                                                                                              Change
                                                         Repurchase        Repurchase
   Earnings per linked unit (cents)                            (26.70)            (26.83)       -0.49%
   Headline earnings per linked unit (cents)                     44.55              45.26        1.59%
   Distributable earnings per (cents)                            72.70              72.16       -0.73%
   NAV (cents)                                                   1,677              1,674       -0.22%
   TNAV (cents)                                                  1,654              1,650       -0.23%
   Weighted average number of linked units in issue
   (‘000)                                                1,767,603,559      1,759,103,559       -0.48%
   Number of linked units in issue (‘000)                1,767,603,559      1,759,103,559       -0.48%

      Notes:
      1. The financial information in the "Before the Repurchase" column has been prepared based
         on Growthpoint’s interim published financial results for the six months ended 31 December
         2012.

      2. Earnings have been decreased by the net finance charges based on an assumed interest
         rate of 8.75%. This effect is expected to be of a continuing nature. A distribution of
         R6,052,000 will be due to Growthpoint as Growthpoint is acquiring the linked units cum
          distribution. Once-off net transaction costs assumed in respect of the Specific Repurchase of
          approximately R1,827,500 have been taken into account.

      3. The Specific Repurchase is assumed to be funded from existing debt facilities not being
         utilised. Mezzanine finance currently lent by Growthpoint to the SPVs shall have been repaid
         to the extent of R72,215,324. The mezzanine finance is currently earning interest of 10.35%
         per annum.

      4. The number of securities held in treasury after the Specific Repurchase is 8,500,000.

7. SALIENT DATES AND TIMES

  The salient dates and times in respect of the Proposed Transaction are summarised below:

                                                                                             2013
   Circular and notices of the general meeting posted to                                Friday, 12 July
   Linked Unitholders
   Last day to trade in Growthpoint linked units in order                               Friday, 26 July
   to be recorded in Growthpoint’s securities register to
   vote at the general meeting
   Record date to be entitled to attend, participate in and                             Friday, 2 August
   vote at the general meeting by close of trading
   Proxy forms for the general meeting to be received by                              Thursday, 8 August
   09h30
   General meeting of Linked Unitholders held at 09h30                                 Monday, 12 August
   Special resolution submitted to CIPC for filing                                     Monday, 12 August
   Results of the general meeting released on SENS                                     Monday, 12 August

  Notes:
     1. All dates and times may be changed by Growthpoint. Any change will be published on SENS.

      2. All times given in this announcement are local times in South Africa.

8. PUBLICATION OF CIRCULAR

  A circular containing full details of the Specific Repurchase and incorporating a notice of general
  meeting is being prepared and will be posted to Linked Unitholders on or about Friday, 12 July 2013.

9. DIRECTOR’S DEALINGS

  In compliance with the Listings Requirements, the following information is disclosed in relation to the
  Specific Repurchase in respect of which binding legal agreements were entered into between
  Growthpoint and an associate of a director whereby Growthpoint linked units will be acquired by an
  associate of a director of Growthpoint at a price of R21.50 per linked unit, subject to the suspensive
  conditions detailed in this announcement.

Director associate:          Meadowood Investments 11 Proprietary Limited
Director:                    Herman Mashaba
Company:                     Growthpoint Properties Limited
Date of transaction:         28 June 2013
Nature of transaction:       Specific repurchase from associate of director
Number of securities:        16,500,000
Class of securities:         Linked units
Total value of securities:   354,750,000
Nature of interest:          Indirect beneficial
Clearance obtained:          Yes

28 June 2013

            Investment bank                                            Sponsor
       Investec Corporate Finance                                Investec Bank Limited

            Legal advisers                                     Reporting Accountants
        Glyn Marais Incorporated                                       KPMG

Date: 28/06/2013 04:30:00 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
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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,
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