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ARROWHEAD PROPERTIES LIMITED - Firm intention by Arrowhead to make offer for all linked units in Vividend, general offer, withdrawal of cautionary

Release Date: 01/04/2014 09:33
Code(s): AWB AWA VIF     PDF:  
Wrap Text
Firm intention by Arrowhead to make offer for all linked units in Vividend, general offer, withdrawal of cautionary

ARROWHEAD PROPERTIES LIMITED                        VIVIDEND INCOME FUND LIMITED
(Incorporated in the Republic of South Africa)      (Incorporated in the Republic of South Africa)
(Registration number 2011/000308/06)                (Registration Number 2010/003232/06)
JSE share code: AWA ISIN: ZAE000158101              JSE share code: VIF ISIN: ZAE000150918
JSE share code: AWB ISIN: ZAE000158119              (Approved as a REIT by the JSE)
(Approved as a REIT by the JSE)                     (“Vividend”)
(“Arrowhead”)


JOINT ANNOUNCEMENT REGARDING:
- A FIRM INTENTION BY ARROWHEAD TO MAKE AN OFFER TO ACQUIRE ALL THE
   LINKED UNITS IN THE CAPITAL OF VIVIDEND NOT ALREADY HELD BY ARROWHEAD
   (“FIRM INTENTION ANNOUNCEMENT”);
- A GENERAL OFFER; AND
- WITHDRAWAL OF VIVIDEND CAUTIONARY ANNOUNCEMENT


1. INTRODUCTION

    Further to the joint announcement made on 24 February 2014, the respective boards of
    directors of Vividend and Arrowhead are pleased to announce that, on 31 March 2014,
    Vividend and Arrowhead (the “Parties”) entered into an implementation agreement (the
    “Implementation Agreement”) in terms of which Arrowhead confirmed its firm intention to
    make an offer to acquire all the issued linked units in Vividend (“Vividend Linked Units”),
    which it does not already hold (the “Offer”) –

   -   by means of one or more indivisibly linked schemes of arrangement (the “Scheme”) in
       terms of section 114 of the Companies Act 71 of 2008, as amended, (the "Companies
       Act"), to be proposed by the independent board of directors of Vividend (the "Vividend
       Independent Board"), appointed in terms of the Takeover Regulations, between Vividend
       and the holders of Vividend Linked Units (“Vividend Linked Unitholders”); or

   -   if the conditions to which the Scheme is subject are not fulfilled, or where applicable
       waived, (as described more fully below), by means of a voluntary general offer extended to
       all Vividend Linked Unitholders (the "General Offer").

    In terms of the Scheme, Vividend Linked Unitholders will, if the Scheme becomes operative,
    receive 0,374 of an Arrowhead A linked unit (“Arrowhead A Linked Unit”) and 0,374 of an
    Arrowhead B linked unit (“Arrowhead B Linked Unit”) for every 1 Vividend Linked Unit
    (“Scheme Consideration”) held by them on the Scheme Consideration record date (the
    “Scheme Record Date”). Arrowhead will not offer any cash alternative unless (as is more fully
    described below) the Takeover Regulation Panel (“TRP”) determines that the Scheme
    Consideration should include a cash amount per Vividend Linked Unit equivalent to the option
    premium of R4,461,500 (four million four hundred and sixty one thousand and five hundred
    Rand) paid by Arrowhead to Stanlib Asset Management (“Stanlib”) (being an amount of
    7 cents per Vividend Linked Unit), in which case the Scheme Consideration shall be increased
    to include an additional cash consideration of R0.07 cents per Vividend Linked Unit.

    The consideration offered in terms of the General Offer ("Offer Consideration"), if it is made,
    will be the same as that offered under the Scheme.

    Based on the volume weighted average price ("VWAP") of Arrowhead A Linked Units and
    Arrowhead B Linked Units on the securities exchange operated by the JSE Limited ("JSE") for
    the 30 days up to and including Friday, 28 March 2014, being the last practical date for
    finalisation of the figures prior to the date of this Firm Intention Announcement (the
    "Publication Date"), the Scheme Consideration implies a Rand value of 506.11 cents per
    Vividend Linked Unit and represents a premium of 5% to the VWAP of Vividend Linked Units
    over the same period of 481.77 cents per Vividend Linked Unit.

    As announced on SENS on 6 December 2013, Arrowhead concluded an agreement with
    Coronation Fund Managers (“Coronation”) pursuant to which Arrowhead acquired 31.7% of
    the issued Vividend Linked Units from Coronation (“Coronation Acquisition”). The purchase
    consideration under the Coronation Acquisition was discharged by Arrowhead through the
    allotment and issue of Arrowhead A Linked Units and Arrowhead B Linked Units to Coronation
    pursuant to which Coronation received 0,374 of an Arrowhead A Linked Unit and 0,374 of an
    Arrowhead B Linked Unit for every 1 Vividend Linked Unit (“Coronation Consideration”) held
    by Coronation. Based on the VWAP of Arrowhead A Linked Units and Arrowhead B Linked
    Units for the 30 days up to and including 5 December 2013 (the day prior to the    
    announcement of the Coronation Acquisition, the implied Rand value of the Coronation
    Consideration was 522.18 cents per Vividend Linked Unit, a 6% premium to the VWAP of
    Vividend Linked Units over the same period of 492.50 cents per Vividend Linked Unit. .

    The Scheme will be subject to the fulfilment of the conditions precedent referred to in
    paragraph 5 below. The making of the General Offer will be subject to the conditions referred
    to in paragraph 6.1 below.

    As previously announced –

    -   Arrowhead has, during early December 2013, acquired 31.7% of the Vividend Linked Units
        in issue from Coronation;

    -   Arrowhead has, with effect from 1 March 2014, acquired the equity in Vividend
        Management Group Proprietary Limited (“Vividend Manco”), the external asset manager
        of Vividend, for a purchase price of R88.6 million. As a result of the change in control of
        Vividend Manco, M Jacobson, G Rabinowitz, M Sandak-Lewin and A Witt, have resigned
        from the Vividend board. Ari Jacobson, Robert Amoils and Bruce Rubenstein have agreed
        to remain on the Vividend board (as CEO, Financial Director and non-executive director
        respectively) for a three month period from 1 March 2014;

    -   Arrowhead has concluded an agreement with Stanlib, in respect of the approximately
        60.2 million Vividend Linked Units controlled by Stanlib (representing approximately 22% of
        the issued Vividend Linked Units), in terms of which–

          -   Stanlib has irrevocably undertaken that, if Arrowhead proposes the Scheme,
              Stanlib will vote in favour of all Vividend Linked Unitholder resolutions necessary
              to approve the Scheme; and

          -   Stanlib has granted Arrowhead an option (the “Stanlib Option”) to require
              Stanlib to accept the General Offer (if it is to be made). As consideration for the
              granting of the Stanlib Option, Arrowhead has paid Stanlib an option premium of
              R4,461,500 (“Option Premium”), equivalent to R0.07 per Vividend Linked Unit.

    Vividend and Arrowhead will make an application to the TRP for a formal ruling as to whether
    or not the Scheme Consideration should be increased by the Option Premium paid by
    Arrowhead to Stanlib. Vividend and Arrowhead linked unitholders will be advised of the TRP’s
    ruling on SENS and in the circular to Vividend Linked Unitholders in relation to the Scheme
    (“Scheme Circular”).

2.  INFORMATION ABOUT ARROWHEAD

    Arrowhead is a listed REIT that holds a diverse portfolio of retail, industrial and commercial
    buildings, valued at approximately R4.5 billion together with a 31.7% interest in Vividend.

3.  RATIONALE FOR THE PROPOSED TRANSACTION

    Rationale for Arrowhead

    The transaction contemplated in the Scheme (or the General Offer, should it become
    applicable) (the "Proposed Transaction") is in line with Arrowhead’s investment strategy of
    only making distribution enhancing acquisitions and will allow Arrowhead to acquire control of
    Vividend’s portfolio of commercial, industrial and retail properties, valued at approximately
    R2 billion, that is complimentary to its own portfolio.

    Rationale for Vividend

    Vividend did not solicit the Proposed Transaction and was approached by Arrowhead following
    its acquisition of Vividend Manco, the acquisition by Arrowhead of a strategic stake in
    Vividend, and Arrowhead's securing of key Vividend Linked Unitholder support for a possible
    transaction.

    Vividend management have advised the Vividend Independent Board of certain structural
    changes in the listed property sector recently which have negatively impacted investor
    sentiment, specifically towards small-mid cap, illiquid property stocks and as a consequence
    the ability of Vividend to continue to acquire property on a non-dilutive basis. The
    aforementioned structural changes in the sector include, inter alia:

         -   increase in bond yields and cost of capital (both debt and equity);

         -   limited liquidity in capital markets to fund acquisitions;

         -   increase in the discount applied by investors to illiquid small-mid cap property
             stocks;

         -   scarcity of potential acquisitions and competition for stock is driving yields to levels
             unachievable for Vividend to transact without significant dilution; and

         -   increased market volatility and reluctance of vendors to bear execution risk.

    Given those factors, the Vividend Independent Board believes that it is in the interests of
    Vividend and Vividend Linked Unitholders that they be given the opportunity to consider the
    Proposed Transaction.

4.  THE SCHEME CONSIDERATION

    4.1   The Scheme, if implemented, will entitle those persons who are recorded in the securities
          register of Vividend on the Scheme Record Date (“Scheme Participants”), to receive the
          Scheme Consideration.

    4.2   The Scheme Consideration will be issued ex entitlement to the Arrowhead income
          distribution for the 6 month period ended 31 March 2014. Vividend Linked Unitholders
          will become entitled, pursuant to the Scheme, to the Arrowhead income distribution for
          the period commencing 1 April 2014 and its future income distributions.

    4.3   The Vividend Linked Units held by Scheme Participants on the Scheme Record Date will
          be acquired by Arrowhead ex entitlement to the Vividend income distribution for the
          6 month distribution period ending 28 February 2014 (“Vividend February Distribution”)
          and for the 1 month period ending 31 March 2014 ("Vividend March Distribution").
          This shall be achieved by Vividend paying to Vividend Linked Unitholders, prior to the
          implementation of the Scheme, both the Vividend February Distribution in accordance
          with its normal distribution timetable, and the Vividend March Distribution in the form of a
          special distribution (the “Special Distribution”). The Special Distribution is expected to
          be paid before the date of implementation of the Scheme (“Operative Date”).

5.  CONDITIONS PRECEDENT TO IMPLEMENTATION OF THE SCHEME

    The Scheme will be subject to the fulfilment or (where applicable) waiver of the following
    conditions precedent (the "Scheme Conditions") -

    5.1   as at 17h00 on the fifth business day before the date on which the last of the scheme
          meetings (or any adjourned scheme meeting) (“Scheme Meetings”) is to be held, a
          material adverse change, as defined below (“Material Adverse Change”) has not
          occurred (and for clarity, Arrowhead may, on written notice given to Vividend at any time
          prior to such time, require the Scheme and the Implementation Agreement to lapse, if it
          has knowledge that a Material Adverse Change has occurred and is occurring at the
          relevant time and same is not proved otherwise by Vividend), it being agreed that this
          condition shall be regarded as having been fulfilled unless Arrowhead has informed
          Vividend by 17h00 on the fifth business day before the date on which the last of the
          Scheme Meetings is to be held (or any adjournment thereof) that this condition has not
          been fulfilled;

    5.2   by not later than 17h00 on 31 July 2014, the approval of the requisite resolutions in
          respect of the Scheme ("the Scheme Resolutions") and the Special Distribution by the
          requisite majority of Vividend Linked Unitholders (in their capacities as holders of
          Vividend Shares and Vividend Debentures) is obtained at the relevant meetings;

    5.3   by not later than 17h00 on 31 July 2014, to the extent required under the listings
          requirements of the JSE ("JSE Listings Requirements"), the requisite approvals of
          Arrowhead Linked Unitholders for the acquisition of the Vividend Linked Units pursuant to
          the Scheme and/or the General Offer and/or the issue of the Scheme Consideration, are
          obtained at the relevant meeting;

    5.4   by not later than 17h00 on 31 August 2014, to the extent required under section 115(3)
          of the Companies Act, approval of the implementation of the Scheme Resolutions by the
          court is obtained and, if applicable, Vividend not having treated the Scheme Resolutions
          as a nullity (which it may not do unless it is instructed to do so by Arrowhead), as
          contemplated in section 115(5)(b) of the Companies Act;
    
    5.5   as at 17h00 on the 2nd (second) business day after the date of conclusion of the last of
          the Scheme Meetings, Vividend Linked Unitholders holding more than 5% (five percent)
          of all the issued Vividend Linked Units not having given, in terms of section 164(3) of the
          Companies Act, valid notice of objection to the Scheme Resolution taken at either
          Scheme Meeting and those objecting Vividend Linked Unitholders not having voted
          against the Scheme Resolution in respect of more than 5% (five percent) of the issued
          Vividend Linked Units at the relevant Scheme Meeting;

    5.6   by not later than 17h00 on 31 August 2014, the receipt of all regulatory approvals that
          may be required in connection with the Offer, including the unconditional approval in
          writing of the relevant South African competition authority/ies, to the extent required in
          terms of the Competition Act, of the transactions contemplated by the Offer, or if such
          approval is conditional, such conditions being acceptable to the party or parties upon
          whom they are imposed or upon whom they have an impact, in their sole and absolute
          discretion;

    5.7   as at 17h00 on the date on which the last of the conditions in clauses 5.2 to 5.6 has been
          fulfilled or, where appropriate, waived, none of the following events shall have occurred
          in respect of Vividend or Arrowhead –

          5.7.1      any corporate action, legal proceedings or other procedure or other step
                     (including an application to court, proposal of a resolution or convening of a
                     meeting of shareholders, members, directors or other officers) is taken by any
                     person with a view to –

                5.7.1.1 a moratorium, compromise, composition, business rescue or similar
                        arrangement with any of its creditors;

                5.7.1.2 its winding-up, dissolution or commencement of business rescue
                        proceedings, or for the seeking of relief under any applicable bankruptcy,
                        insolvency, company or similar law, or any such resolution; or

          5.7.2      the value of its assets is less than its liabilities (taking into account of contingent
                     and prospective liabilities) or it is unable to pay its debts as they fall due,

          it being agreed that this condition shall be regarded as having been fulfilled unless either
          Vividend or Arrowhead has informed the other by no later than 17h00 on the date on
          which the last of the conditions in clauses 5.2 to 5.6 has been fulfilled or, where
          appropriate, waived, that it has knowledge that this condition has not been fulfilled; and

    5.8   by not later than 17h00 on 31 August 2014, the TRP has issued a compliance certificate
          in relation to the Scheme.

    In relation to paragraph 5.1, Material Adverse Change means –

    -     any circumstance, fact or event, actual or which has arisen or might reasonably be
          expected to arise which, alone or together with any other circumstance, fact or event, which
          has arisen or which might reasonably be expected to arise has, or is reasonably be
          expected to have, the effect of a reduction of 10% (ten percent) or more of Vividend’s net
          property income and/or a reduction of 10% (ten percent) or more of the value of the
          Vividend property portfolio (other than a reduction in value resulting from macro-economic
          factors, including but not limited to changes in interest rates or changes to applicable
          discount rates used for valuing properties, which are not related to the specific factors of the
          property/ies concerned); or

    -     Vividend having committed a material breach of any of its material undertakings referred to
          in paragraphs 7.1 and 7.3 below (and as more fully described in the Implementation
          Agreement).

    The conditions set out in paragraphs 5.1, 5.5 and 5.7 above can be waived by Arrowhead.
    Save where any of the remainder of the conditions are of a regulatory nature, they can be
    waived by agreement in writing between Arrowhead and Vividend. Arrowhead and Vividend
    may by agreement in writing and with the prior approval of the TRP (where required) extend
    the date for fulfilment of any of the conditions.

6.  THE OFFER

    6.1   The General Offer is subject to the parties having announced through SENS and the
          press, as required, that any of the following Scheme Conditions has not been fulfilled
          (and, where applicable, has not been waived by Arrowhead) and that the Scheme has
          therefore failed:

          6.1.1     the approval by Vividend Linked Unitholders of the Scheme (as referred to in
                    paragraph 5.2 above);

          6.1.2     to the extent required under section 115(3) of the Companies Act, the approval
                    of the implementation of the Scheme Resolutions by the court is obtained and,
                    if applicable, Vividend not having treated the Scheme Resolutions as a nullity
                    (as referred to in paragraph 5.4 above); and

          6.1.3     as at 17h00 on the second business day after the date of conclusion of the last
                    of the Scheme Meetings, Vividend Linked Unitholders holding more than 5% of
                    all the issued Vividend Linked Units not having given, in terms of section 164(3)
                    of the Companies Act, valid notice of objection to the Scheme Resolutions
                    taken at either of the Scheme Meetings and those objecting Vividend Linked
                    Unitholders not having voted against the Scheme Resolutions in respect of
                    more than 5% of the issued Vividend Linked Units at the relevant Scheme
                    Meeting (as referred to in paragraph 5.5 above),

          (such conditions being the "Offer Trigger Conditions").

    6.2   The General Offer will become effective, and be open for acceptances, once such
          announcement is made via SENS and the press. Vividend Linked Unitholders will be
          advised in such announcement of the relevant dates and timetable for implementation of
          the General Offer.


    6.3   The General Offer will also be subject to the fulfilment or waiver of all the remaining
          Scheme Conditions (i.e. those other than the Offer Trigger Conditions). Accordingly, if
          the General Offer has become effective and open for acceptances, but any of the
          remaining Scheme Conditions have not yet been fulfilled or waived, the sale of Vividend
          Linked Units resulting from any acceptances of the General Offer shall remain subject to
          the fulfilment or waiver of those remaining Scheme Conditions. Any such conditions
          which are not of a regulatory nature can be waived or relaxed by Arrowhead.
  
    6.4   The Offer Consideration will be the same as the Scheme Consideration. However,
          although Vividend Linked Units purchased pursuant to the General Offer will be acquired
          ex the entitlement to the Vividend February Distribution, there will be no Vividend March
          Distribution (i.e. Special Distribution) in the context of the General Offer.

    6.5   Arrowhead is currently giving consideration to a possible termination of the listing of the
          Vividend Linked Units on the JSE in the event that the Scheme fails and the General
          Offer is made. Any such termination would, in terms of the listings requirements of the
          JSE, require the approval of Vividend Linked Unitholders in general meeting. Arrowhead
          shall, prior to the finalisation of the Circular referred to below, inform Vividend whether or
          not it requires such a resolution to be placed before a general meeting of Vividend Linked
          Unitholders, and in such event the Circular shall include the requisite information
          regarding the proposed termination of listing and a notice of general meeting at which the
          requisite resolution will be considered and voted on. For the avoidance of doubt, the
          making of the General Offer shall not be subject to the passing of the aforementioned
          resolution

7.  IMPLEMENTATION AGREEMENT

    The Implementation Agreement provides, inter alia, for the following:

    7.1   Between the date of signing of the Implementation Agreement and the later of the
          Operative Date and the date upon which the Offer is implemented (“Interim Period”),
          Vividend shall not directly or indirectly solicit any alternative proposal to the Proposed
          Transaction and is further precluded from approving or recommending any alternative
          proposal or the entering of any agreement in respect of any alternative proposal, save for
          any bona fide unsolicited offer that is on terms that are more favourable to Vividend
          Linked Unitholders than the Offer.

    7.2   Notwithstanding the aforegoing, Vividend and the Vividend Independent Board will not be
          prevented from complying with any requirements imposed by law or the rules of any
          regulatory body in respect of any alternative proposal.

    7.3   Vividend undertakes that during the Interim Period, it shall carry on its business in the
          ordinary and regular course.

    7.4   Arrowhead undertakes that, during the Interim Period, it shall not effect any subdivisions
          of its linked unit capital or any capital distributions without first having agreed an
          appropriate amendment to the Scheme Consideration with Vividend.

    7.5   Between the date of signing of the Implementation Agreement and the fifth business day
          before the date of the Scheme Meetings, Arrowhead and Vividend are obliged to advise
          the other party of any Material Adverse Change relating to them.

8.  FUNDING OF THE PROPOSED TRANSACTION

    Arrowhead has an authorised share capital of 2,000,000,000 ordinary shares which translates
    into an authorised linked unit capital of 1,000,000,000 Arrowhead A Linked Units and
    1,000,000,000 Arrowhead B Linked Units, respectively, and an issued share capital of  
    617,559,182 ordinary shares, which translates into 308,779,591 Arrowhead A Linked Units
    and Arrowhead B Linked Units, respectively, as at the date of this Firm Intention
    Announcement.
  
    The Scheme, if implemented, will entitle the Scheme Participants to receive a consideration of
    0,374 of an Arrowhead A Linked Unit and 0,374 of an Arrowhead B Linked Unit for every
    Vividend Linked Unit disposed of pursuant to the Scheme.

    If the aggregate number of Arrowhead Linked Units of either class deliverable to a Vividend
    Linked Unitholder yields a fractional result then the number of Arrowhead linked units of that
    class shall be rounded up to the nearest whole number if the fraction equals 0.5 or more, and
    the number shall be rounded down to the nearest whole number if the fraction equals less
    than 0.5 (“Rounding Convention”).

    If the Scheme is implemented, a total of 68,578,661 Arrowhead A Linked Units and
    68,578,661 Arrowhead B Linked Units (subject to the Rounding Convention) will be issued to
    Vividend Linked Unitholders in consideration for all the Scheme Linked Units
    (being183,365,403 Vividend Linked Units).

    Consequently, Arrowhead has sufficient authorised but unissued linked units in order to issue
    the full consideration in terms of the Scheme to Vividend Linked Unitholders if the Scheme is
    approved and implemented, or in terms of the General Offer if all Vividend Linked Unitholders
    accept the General Offer.

    Unless the TRP rules that the Option Premium of R0.07 per Vividend Linked Unit must be
    offered to all of the Scheme Participants, there is no cash consideration payable under the
    Scheme. If the TRP rules that the Option Premium must be extended to all of the Scheme
    Participants, then this will result in the Scheme Participants receiving an additional cash
    consideration equivalent to R0.07 per Vividend Linked Unit (the “Additional Cash
    Consideration”). The details of the TRP’s ruling in this regard will be published in SENS and
    contained in the circular to Vividend Linked Unitholders. Arrowhead has provided the requisite
    guarantees to the TRP in relation to its ability to discharge the Additional Cash Consideration
    should this become applicable.

9.  UNITHOLDING OF ARROWHEAD IN VIVIDEND AND CONCERT PARTIES

    9.1   As at the date of this Firm Intention Announcement, Arrowhead holds 84,966,285
          (31.7%) of the Vividend Linked Units in issue. Arrowhead does not hold or control
          (directly or indirectly) any other Vividend Linked Units and does not have any
          arrangements to acquire Vividend Linked Units, other than the Stanlib option.

    9.2   As at the date of this Firm Intention Announcement, the directors of Vividend hold or
          control (directly or indirectly) 2,131,360 Vividend Linked Units, representing 1.2% of the
          Scheme Linked Units.

    9.3   With the exception of the Implementation Agreement and the Stanlib Option, no
          arrangements, agreements or understandings which have any connection with or
          dependence on the Proposed Transaction existed between Vividend, the Vividend
          Linked Unitholders, Arrowhead or any person acting in concert with it, or any director of
          Vividend or any person who was a director of Vividend within the period commencing
          12 months prior to the date of this Firm Intention Announcement, or any person who is or
          was a Vividend Linked Unitholder within the abovementioned period.

10. IRREVOCABLE UNDERTAKINGS

    As indicated above, Arrowhead has received an irrevocable undertaking from Stanlib, which
    controls 60.2 million Vividend Linked Units (representing approximately 22% of the issued
    Vividend Linked Units, and approximately 32%of the issued Vividend Linked Units which
    Arrowhead does not already own) to vote in favour of the Scheme Resolutions.

11. INDEPENDENT BOARD AND FAIR AND REASONABLE OPINION

    The Vividend Independent Board, comprising Solomon Slom, Zithulele Luke Combi and Brian
    Bank, has appointed Questco Proprietary Limited, an independent adviser acceptable to the
    TRP, as the independent expert (the “Independent Expert”) in terms of section 114(2) of the
    Companies Act and the regulations published in terms of section 120 of the Companies Act
    and set out in Chapter 5 of the Companies Regulations, 2011 (“Takeover Regulations”), to
    provide it with external advice in relation to the Scheme and to make appropriate
    recommendations to the Independent Board in the form of a fair and reasonable opinion in
    terms of section 114(3) of the Companies Act and Takeover Regulation 110.

    The substance of the external advice received from the Independent Expert and the views of
    the Vividend Independent Board will be detailed in the Scheme Circular.

12. CIRCULARS

    Details of the Scheme will be included in the Scheme Circular, which will contain, inter alia, the
    terms of the Scheme, a notice convening each of the Scheme Meetings, forms of proxy in
    connection with the Scheme Meetings, and a form of acceptance, surrender and transfer in
    respect of Vividend Linked Units. Subject to the requisite approvals being received from the
    JSE, the TRP, and the Financial Surveillance Department of the South African Reserve Bank
    for the posting of the Scheme Circular, the Scheme Circular is expected to be posted to
    Vividend Linked Unitholders during May 2014 in accordance with the parties’ obligations in
    terms of the Takeover Regulations.

    The Proposed Transaction will, in terms of the JSE Listings Requirements, be categorised as
    a category 1 transaction for Arrowhead, and accordingly requires the approval of Arrowhead
    Linked Unitholders in general meeting. A circular to Arrowhead Linked Unitholders, providing
    the requisite details of the Proposed Transaction and convening a meeting of Arrowhead
    Linked Unitholders to consider and vote on the Proposed Transaction and the requisite
    resolutions, will be issued as soon as practicable. Subject to the requisite approvals being
    received from the JSE, for the posting of such circular, the circular is expected to be posted to
    Arrowhead Linked Unitholders during May 2014.

13. UNAUDITED PRO FORMA EARNINGS AND NET ASSET VALUE EFFECTS PERTAINING
    TO THE SCHEME

    In addition to the Scheme Consideration, Vividend Linked Unitholders will receive the Vividend
    February Distribution as well the Vividend March Distribution (by way of the Special
    Distribution),.

    In terms of Regulation 101(7)(b)(iv) of the Takeover Regulations, a firm intention
    announcement must contain inter alia, the pro forma earnings and asset value per offeree
    regulated company security if the offer consideration consists wholly or partly of offeror
    securities.

    The pro forma financial effects of the Scheme for Vividend Linked Unitholders are provided for
    illustrative purposes only to provide information about how the Scheme may have affected the
    financial performance and position of Vividend, and because of their nature, may not fairly
    represent Vividend’s financial performance and position after the Scheme. Only the Vividend
    Independent Board is responsible for the preparation of such pro forma financial effects.
    The pro forma adjustments to the statement of comprehensive income have been calculated
    on the assumption that the operative date of the Scheme was on 1 September 2012,
    illustrating the effect of 1 Vividend Linked Unit being exchanged for 0,374 of an Arrowhead
    A Linked Unit and 0,374 of an Arrowhead B Linked Unit, and, for the purposes of the
    statement of financial position, as if the operative date of the Scheme was on 31 August 2013.

    The table below sets out the pro forma financial effects of the Scheme based on the
    12 months results of Vividend to 31 August2013:

                                                                 Before    After the    Change
                                                                    the      Scheme2         %
                                                                Scheme1
    Basic earnings per linked unit (cents)                        10.97        84.70      672%
    Headline earnings per linked unit (cents)                     54.22        50.41       (7%)
    Distribution per linked unit (cents)                          50.00        41.30      (17%)
    Net asset value per linked unit (cents)                         515          475       (8%)
    Tangible net asset value per linked unit (cents)                515          462      (10%)
    Weighted average number of linked units in issue (‘000)     215,586       80,629
    Number of linked units in issue (‘000)                      267,678      100,112

   Notes and assumptions:
   1. The financial information in the “Before the Scheme” column has been prepared based on
      the 12 month results for Vividend to 31 August 2013, as extracted from Vividend’s audited
      results for the twelve months ended 31 August 2013.

   2. The financial information in the “After the Scheme” column is based on Arrowhead’s
      financial effects pursuant to the Proposed Transaction (for the 12 months ended
      30 September 2013) and multiplying these results by 0.374 to provide the pro forma
      financial effects for Vividend Linked Unitholders.

14. WITHDRAWAL OF VIVIDEND CAUTIONARY ANNOUNCEMENT

    Following the release of this Firm Intention Announcement, the joint cautionary announcement
    published by Vividend and Arrowhead on 24 February 2014 is withdrawn and caution is no
    longer required to be exercised by Vividend Linked Unitholders when dealing in their Vividend
    Linked Units. Arrowhead Linked Unitholders are referred to the unrelated cautionary
    announcement released on 19 March 2014 which remains in place.

15. VIVIDEND RESPONSIBILITY STATEMENT

    The Vividend Independent Board (to the extent that the information in this Firm Intention
    Announcement relates to Vividend) accepts responsibility for the information contained in this
    Firm Intention Announcement and confirms that, to the best of the respective knowledge and
    belief of the members of the Vividend Independent Board, the information is true and does not
    omit anything likely to affect the importance of the information included. The financial
    information contained in this Firm Intention Announcement has not been reviewed or reported
    on by the external auditors of Vividend.

16. ARROWHEAD RESPONSIBILITY STATEMENT

    Arrowhead’s board of directors (to the extent that the information in this Firm Intention
    Announcement relates to Arrowhead) accepts responsibility for the information contained in
    this Firm Intention Announcement and confirms that, to the best of the respective knowledge
    and belief of the members of the Arrowhead board, the information is true and does not omit
    anything likely to affect the importance of the information included. The financial information
    contained in this Firm Intention Announcement has not been reviewed or reported on by the
    external auditors of Arrowhead.


1 April 2014


Sponsor and Corporate Advisor to Arrowhead
Java Capital

Legal Advisor to Arrowhead
DLA Cliffe Dekker Hofmeyr

Sponsor and Corporate Advisor to Vividend
PSG Capital

Legal Advisor to Vividend
Fluxmans Inc

Date: 01/04/2014 09:33:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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