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GROWTHPOINT PROPERTIES LIMITED - Specific Repurchase of Growthpoint Linked Units and Dealings in Securities

Release Date: 01/07/2013 16:34
Code(s): GRT     PDF:  
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Specific Repurchase of Growthpoint Linked Units and Dealings in Securities

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



ACQUISITION BY GROWTHPOINT MANAGEMENT SERVICES PROPRIETARY LIMITED
(“GMS”) OF 26,333,333 GROWTHPOINT LINKED UNITS AND MIGANU INVESTMENT
HOLDINGS PROPRIETARY LIMITED OF 12,000,000 GROWTHPOINT LINKED UNITS FOR AN
AGGREGATE PURCHASE CONSIDERATION OF R824,166,660 AND DEALING IN SECURITIES
BY ASSOCIATES OF DIRECTORS



1. BACKGROUND TO THE TRANSACTION

  In August 2005 Growthpoint concluded a Broad-based Black Economic Empowerment (“BBBEE”)
  transaction with Amabubesi Investments Proprietary Limited (“Amabubesi”), Miganu Investment
  Holdings Proprietary Limited (“Miganu”), Unipalm Investment Holdings Limited (“Unipalm”), Desert
  Wind Properties 84 Proprietary Limited (“Desert Wind”) and Amabubesi Beneficial Trust (collectively
  referred to as “the Beneficiaries”), in terms of which the Beneficiaries acquired 100,000,000
  Growthpoint linked units (14.2% of the total linked units then in issue) through Quick Leap
  Investments 429 Proprietary Limited (“Quick Leap”) and the AMU Trust, which are special purpose
  vehicles created for the purpose of holding Growthpoint linked units on behalf of the Beneficiaries.

  At that time, Growthpoint, the Beneficiaries, Quick Leap and AMU Trust 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 the Growthpoint linked units is repaid. After the
  expiry of the lock-in period, the Beneficiaries have first pre-emptive rights on the Growthpoint linked
  units held within Quick Leap, following which Growthpoint retains pre-emptive rights to acquire all of
  the linked units indirectly owned by the Beneficiaries in the event that the Beneficiaries elect to sell in
  whole or in part their Growthpoint linked units held within Quick Leap.

  To date, significant value has been created for the Beneficiaries and their shareholders due to the
  good performance of the Growthpoint linked unit price since 2005. However, the original funding
  structure continues to have significant debt exposure to a third party funder, namely Investec Bank
  Limited (“Investec”), and mezzanine debt facilities provided by Growthpoint. Following internal
  deliberations by the boards of directors of Unipalm and Desert Wind, a strategic decision was taken
  by each of Unipalm and Desert Wind to extricate their entire beneficial interest from the existing
  structure. Unipalm and Desert Wind beneficially hold 33,333,333 and 5,000,000 Growthpoint linked
  units respectively.

  Considering that (i) the Beneficiaries currently remain within the lock-in period as provided for in the
  Relationship Agreement, and (ii) the other beneficiaries within Quick Leap as well as Growthpoint
  itself retain pre-emptive rights over the sale of the beneficial interest in Growthpoint linked units by
  Unipalm and Desert Wind; Miganu and GMS have agreed, subject to the suspensive conditions set
  out below, to acquire a total of 38,333,333 Growthpoint linked units, where Miganu and GMS will
  acquire 12,000,000 and 26,333,333 Growthpoint linked units respectively (“the Specific
  Repurchase”), for an aggregate purchase consideration of R824,166,660. The proceeds of which will
  allow Unipalm and Desert Wind to extinguish all of the proportional debt attributable to their beneficial
  holding and entirely relinquish their beneficial holding in Growthpoint linked units beneficially held
  through Quick Leap and the AMU Trust.

  Additionally, an agterskot (“the Agterskot”) totaling R33,333,333 will be payable to Unipalm to the
  extent the Growthpoint 15 day volume weighted average price (“VWAP”) reaches or exceeds R30.00
  per linked unit during the 18-month period commencing 2 business days following the fulfillment of
  the suspensive conditions as detailed below (“the Closing Date”).

  Lastly, Growthpoint and Miganu have agreed to underwrite the costs in the proportion 70% and 30%
  respectively relating to the unwinding of swap contracts previously entered into with Investec in order
  to fix the cost of funding within Quick Leap. Such underwriting of swap costs relates to the portion of
  debt attributable to Unipalm and is for the benefit of Unipalm only. Such costs will only be payable to
  the extent they exceed R2,000,000 in total (“the Underwriting”).

2. THE UNIPALM TRANSACTION

  Growthpoint linked unitholders (“Linked Unitholders”) are 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 Miganu and Unipalm (“the Unipalm binding agreement”) pursuant to which
  GMS will acquire 23,333,333 linked units (“the Unipalm Specific Repurchase”) and Miganu will
  acquire 10,000,000 linked units from Quick Leap at a price of R21.50 per linked unit, amounting to a
  gross purchase consideration of R716,666,660 (“the Unipalm Transaction”). The purchase price per
  linked unit represents a discount of 16.7% to the 30 day VWAP of Growthpoint linked units as at 28
  June 2013 and is inclusive of rights to any distribution that has accrued in respect of the linked units
  being acquired until the Closing Date.

  The Agterskot of R1.00 per linked unit acquired, totaling R23,333,333 due from Growthpoint and
  R10,000,000 due from Miganu, will become payable in the event the Growthpoint 15 day VWAP
  reaches or exceeds R30.00 per linked unit within the 18 month period commencing on the Closing
  Date.

  Growthpoint and Miganu have agreed to the Underwriting for the benefit of Unipalm. The swap
  contracts have been entered into by Quick Leap with Investec in order to fix the cost of funding on a
  tranche of debt advanced by Investec to Quick Leap. The Underwriting amount and the financial
  effects thereof are considered immaterial.

  In the event that Amabubesi elects to exercise any pre-emptive rights as detailed above, Growthpoint
  and Miganu may agree to pursue the Unipalm Transaction in respect of the reduced number of units.

3. THE DESERT WIND TRANSACTION

  Linked Unitholders are advised that GMS has entered into an agreement with Miganu and Desert
  Wind (“the Desert Wind binding agreement”) pursuant to which GMS will acquire 3,000,000 linked
  units (“the Desert Wind Specific Repurchase”) and Miganu will acquire 2,000,000 linked units from
  Quick Leap at a price of R21.50 per linked unit, amounting to a gross purchase consideration of
  R107,500,000 (“the Desert Wind Transaction”). The purchase price per linked unit represents a
  discount of 16.7% to the 30 day VWAP of Growthpoint linked units as at 28 June 2013 and is
  inclusive of any rights to distributions made by Growthpoint in the future.

  In the event that Amabubesi elects to exercise any pre-emptive rights as detailed above, Growthpoint
  and Miganu may agree to pursue the Desert Wind Transaction in respect of the reduced number of
  units.

4. RATIONALE FOR THE SPECIFIC REPURCHASE

  The Specific Repurchase 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 as at 28 June
  2013. It is Growthpoint’s intention to utilise the linked units purchased pursuant to the Specific
  Repurchase to structure a new staff share incentive scheme which would have the objective of
  incentivising and retaining Growthpoint staff over the longer term as well as to pursue new
  transactions in the furtherance of Growthpoint's overall empowerment credentials and BEE rating.

5. SPECIFIC REPURCHASE FROM A RELATED PARTY

  Ragavan Moonsamy is a director of Growthpoint and an associate of Unipalm due to his indirect
  beneficial holding in Unipalm. As such, the Unipalm Specific Repurchase, albeit through Quick Leap,
  constitutes a specific repurchase from a related party.

  However, in accordance with the JSE Listings Requirements (“Listings Requirements”), the
  Unipalm Specific Repurchase is to be implemented at a discount to the 30 day VWAP, therefore, a
  fairness opinion will not be required.

6. SUSPENSIVE CONDITIONS

  The Unipalm Transaction is subject to fulfillment of the suspensive conditions before 31 August 2013
  that:

    i. the shareholders of Unipalm and Miganu shall have adopted the requisite resolutions to
       approve and give effect to the Unipalm Transaction in accordance with the Companies Act, No.
       71 of 2008 (“the Companies Act”);

    ii. the board of directors of each of Unipalm and Miganu shall have approved the terms of the final
        sale and purchase agreements;

   iii. Investec shall have unconditionally undertaken to release its security interest in the linked units
        to be acquired by GMS and Miganu on the date that all suspensive conditions have been
        fulfilled against receipt of payment due to it pursuant to the Investec debt financing agreements
        in a form satisfactory to all the parties to the Unipalm Transaction;

   iv. all pre-emptive rights shall have been waived in writing to the satisfaction of GMS, Unipalm and
       Miganu;

    v. to the extent required, the AMU Trust Deed shall have been amended to enable the Unipalm
       Transaction to proceed on the terms contemplated in the Unipalm binding agreement;

   vi. a tax opinion or binding tax ruling from SARS is to be obtained to the satisfaction of Unipalm
       confirming the specific tax treatment of the Unipalm Transaction, including the effect of
        prepayment and swap costs payable by Quick Leap, on the minimum amount of R261,000,000
        expected to be received by Unipalm before accounting for dividend withholdings tax; and

   vii. Linked Unitholders shall have adopted the requisite resolutions in accordance with the
        Companies Act and the Listings Requirements approving the Unipalm Specific Repurchase.

  The Desert Wind Transaction is subject to fulfillment of the suspensive conditions before 31 August
  2013 that:

    i. the shareholders of Desert Wind and Miganu shall have adopted the requisite resolutions to
       approve and give effect to the Desert Wind Transaction in accordance with the Companies Act;

    ii. the board of directors of each of Desert Wind and Miganu shall have approved the terms of the
        final sale and purchase agreement;

   iii. Investec shall have unconditionally undertaken to release its security interest in the linked units
        to be acquired by GMS and Miganu on the date that all suspensive conditions have been
        fulfilled against receipt of payment due to it pursuant to the Investec debt financing agreements
        in a form satisfactory to all the parties to the Desert Wind Transaction;

   iv. all pre-emptive rights shall have been waived in writing to the satisfaction of GMS, Desert Wind
       and Miganu or the parties who hold such rights shall have elected not to exercise them;

    v. to the extent required, the AMU Trust Deed shall have been amended to enable the Desert
       Wind Transaction to proceed as per the terms set out in the Desert Wind binding agreement;
       and

   vi. Linked Unitholders shall have adopted the requisite resolutions in accordance with the
       Companies Act and the Listings Requirements approving the Desert Wind Specific
       Repurchase.

7. UNAUDITED AND UNREVIEWED PRO FORMA FINANCIAL EFFECTS OF THE UNIPALM
   SPECIFIC REPURCHASE AND THE DESERT WIND SPECIFIC REPURCHASE

  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 non-public 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)          (27.11)     -1.52%
   Headline earnings per linked unit (cents)                       44.55            44.85      0.67%
   Distributable earnings per linked unit (cents)                  72.70            72.44     -0.36%
   NAV per linked unit (cents)                                     1,677            1,670     -0.41%
   TNAV per linked unit (cents)                                    1,654            1,647     -0.44%
   Weighted average number of linked units in issue
                                                           1,767,603,559   1,741,270,226      -1.49%
   (‘000)
   Number of linked units in issue (‘000)                  1,767,603,559   1,741,270,226      -1.49%

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

     2. The financial information in the “After the Specific Repurchase” column is the combined effect
        of the Unipalm Specific Repurchase and the Desert Wind Specific Repurchase.

     3. 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
        R18,749,333 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 R5,661,667 have been taken into account.

     4. The Specific Repurchase is assumed to be funded from existing debt facilities not being
        utilised. Mezzanine finance currently lent by Growthpoint to Quick Leap shall have been
        repaid to the extent of R53,274,197. The mezzanine finance is currently earning interest of
        15% per annum.

     5. The cost of the Underwriting is considered as immaterial and has not been taken into account
        when preparing the pro forma financial effects.

     6. The number of securities held in treasury after the Specific Repurchase is 26,333,333 before
        taking into account the specific repurchase of 8,500,000 Growthpoint linked units from
        Phatsima Properties Proprietary Limited as announced on 28 June 2013.

8. SALIENT DATES AND TIMES

  The salient dates and times in respect of the Unipalm Transaction and the Desert Wind 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 are subject to change by Growthpoint. Any change will be published on
         SENS.

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

9. 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.

10. DEALINGS IN SECURITIES BY ASSOCIATES OF DIRECTORS

  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 associates of directors whereby Growthpoint linked units will be acquired by an
  associate of a director of Growthpoint and simultaneously sold by another director of Growthpoint at a
  price of R21.50 per linked unit, before taking into account the Agterskot of R1.00 per linked unit
  subject to the suspensive conditions detailed in this announcement.

  Director associate:          Unipalm Investment Holdings Limited
  Director:                    Ragavan Moonsamy
  Company:                     Growthpoint Properties Limited
  Date of transaction:         28 June 2013
  Nature of transaction:       Disposal of linked units
  Number of securities:        33,333,333
  Class of securities:         Linked units
  Total value of securities:   R716,666,659.50
  Nature of interest:          Indirect beneficial
  Clearance obtained:          Yes

  Director associate:          Miganu Investment Holdings Proprietary Limited
  Director:                    Mzolisi Diliza
  Company:                     Growthpoint Properties Limited
  Date of transaction:         28 June 2013
  Nature of transaction:       Acquisition of linked units
  Number of securities:        12,000,000
  Class of securities:         Linked units
  Total value of securities:   R258,000,000
  Nature of interest:          Indirect non-beneficial
  Clearance obtained:          Yes

1 July 2013
Sandton

            Investment bank                                   Sponsor
       Investec Corporate Finance                       Investec Bank Limited

            Legal advisers                             Reporting Accountants
        Glyn Marais Incorporated                               KPMG

Date: 01/07/2013 04:34:00 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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