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Specific issue of shares for cash to Redefine Empowerment Trust, empowerment initiative in respect of Fountainhead
REDEFINE PROPERTIES LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1999/018591/06)
JSE share code: RDF ISIN: ZAE000190252
(Approved as a REIT by the JSE)
(“Redefine” or the “company”)
SPECIFIC ISSUE OF SHARES FOR CASH TO THE REDEFINE EMPOWERMENT TRUST AND EMPOWERMENT INITIATIVE IN RESPECT OF
FOUNTAINHEAD PROPERTY TRUST
1. Introduction
As part of its commitment to the broad-based black economic empowerment and the sustainable and long-term
economic and social development of previously disadvantaged groups of persons:
- Redefine has agreed to issue up to 300 million shares to the Redefine Empowerment Trust (the
“Redefine Empowerment Trust”), which has been established to perform public benefit activities with
the object of benefitting qualifying entities, school children and students in order to contribute to the
empowerment and upliftment of those beneficiaries. The public benefit activities to be performed by the
Redefine Empowerment Trust include, inter alia, education and training at all levels; the provision of
scholarships and bursaries for studying and research, career guidance and counselling, equipment for
educational institutions and education enrichment and support; and community development and youth
leadership and development programmes;
- Redefine has agreed to dispose of 75 million Fountainhead Property Trust units to an investment special
purpose vehicle established to enable a wholly owned subsidiary of the Bakgatla-Ba-Kgafela Investment
Holdings Proprietary Limited (“BBK”), the investment company for the Sedibelo Community
Development Trust (the “Sedibelo Trust”). The Sedibelo Trust is a community based trust which
operates for the benefit of the Bakgatla-Ba-Kgafela traditional community which is a community of about
350 000 people in the North West province of South Africa. The primary mandate of the Sedibelo Trust
is to assist in the infrastructure development, job creation and poverty alleviation within the Bakgatla-Ba-
Kgafela community and to development and implementation projects aimed at the economic and social
development of the community.
2. Specific issue of shares for cash to the Trust
Redefine has agreed to issue up to 300 million Redefine shares (the “subscription shares”) to the Redefine
Empowerment Trust at a 5% discount to the clean 30 day volume weighted average traded price per Redefine
share (the “subscription price”) on the subscription date.
The subscription price will be financed by way of an interest bearing loan from Redefine (the “Redefine loan”)
secured by a pledge of the subscription shares. Provided that the Redefine share price has achieved certain
thresholds (and unless Redefine agrees to extend the period of the Redefine loan) the Redefine loan will be
repaid in nine annual tranches out of the proceeds of the sale of subscription shares.
The specific issue remains subject to the receipt of all necessary Redefine shareholder approvals.
3. Pro forma financial effects of the specific issue
The pro forma financial effects of the specific issue on Redefine’s net asset value and tangible net asset value
per share, earnings per share, headline earnings per share, diluted earnings per share and diluted earnings per
share for the 12 months ended 31 August 2014 are set out below.
The pro forma financial effects are the responsibility of the directors of Redefine and have been prepared for
illustrative purposes only, to provide information on how the specific issue may have impacted on the historical
financial results of Redefine for the twelve months ended 31 August 2014.
Due to its nature, the pro forma financial information (collectively, the pro forma financial effects, pro forma
consolidated statement of financial position and pro forma consolidated statement of comprehensive income)
may not give a fair reflection of Redefine’s financial position, changes in equity, results of operations and cash
flows subsequent to the specific issue of shares for cash.
The table below reflects the pro forma financial effects of the specific issue of shares for cash on a Redefine
shareholder:
Specific
Before the issue After the
specific issue adjustments specific issue
Net asset value per share (cents) 976.03 - 976.03
Net tangible asset value per share (cents) 819.52 - 819.52
Earnings per share (cents) 146.36 (1.59) 144.77
Diluted earnings per share (cents) 123.78 (1.35) 122.43
Headline earnings per share (cents) 75.94 (1.59) 74.35
Diluted headline earnings per share (cents) 64.22 (1.35) 62.87
Notes and assumptions:
1. The “Before specific issue” column has been extracted, without adjustment from Redefine’s integrated
annual report for the twelve months ended 31 August 2014.
2. The Redefine Empowerment Trust has subscribed for new shares in Redefine. The subscription price will
be financed by the Redefine Loan. The Redefine Loan will be settled from the proceeds of the sale of
Subscription Units by the Redefine Empowerment Trust. In effect therefore Redefine has granted the
Redefine Empowerment Trust an option for no consideration. In terms of IFRS2 Redefine is required to
estimate the fair value of the option and recognise the cost thereof over the vesting period.
3. At this stage a grant date, being the date at which the entity and another party agree to a share-based
payment arrangement, has not been defined and therefore no charge in terms of IFRS2 can be
determined. However, for purposes of presenting the pro forma financial information to shareholders,
and in particular the IFRS2 charge, it has been assumed that the grant date was 1 September 2013.
4. With the aforementioned in mind, the following principle assumptions have been applied in valuing the
option premium:
• a call option to acquire a total of 300 000 000 Redefine ordinary shares has been issued to the
beneficiaries of the Redefine Empowerment Trust;
• the Black-Scholes model has been applied in valuing the call option;
• the option can be exercised in annual tranches occurring on the anniversary date of the assumed
grant date of 1 September 2013 over the succeeding 9 years;
• the first and second year tranches grant the holder thereof the right to acquire 45 000 000 Redefine
ordinary shares per year and 30 000 000 per year in years 3 to 9 respectively;
• the current “clean” Redefine share price has been assumed at R11,10 per share;
• the strike price on each of the tranches has been assumed at the current Redefine share price plus:
• 100cents,
• 173 cents,
• 250 cents,
• 331 cents,
• 418 cents,
• 509 cents,
• 606 cents,
• 709 cents and
• 819 cents in years 1 to 9 respectively;
• the dividend yield has been assumed at 7,5% per annum;
• the risk free interest rate has been assumed at 6,5% per annum; and,
• the volatility has been assumed at 20%.
5. On this basis the total option premium to be amortised over the vesting period has been valued at
R132.15 million and of this R49.1 million is to be amortised in the first year.
6. The subscription shares will be accounted for as treasury shares, in terms of IFRS, until such time as the
subscription shares are sold by the Redefine Empowerment Trust or the Redefine Loan is repaid,
whichever is the earliest.
4. The sale of Fountainhead units to the Sedibelo Trust
Following discussion that began in late 2014 and the conclusion of a terms sheet in January 2015, Redefine has
entered into an agreement with, inter alia, the Sedibelo Trust to sell 75 million Fountainhead units (the
“Fountainhead units”) to a special purpose vehicle established by Sedibelo Trust (the “BBK SPV”). The
Fountainhead units will be sold ex the entitlement to the Fountainhead distribution for the 6 months ended 28
February 2015, for a price of R9.19 per Fountainhead unit Of the aggregate purchase price of almost R700
million, R150 million (equating to R2 per Fountainhead unit) will be funded out of the Sedibelo Trust’s own
resources with the balance to be raised by way of debt funding that will credit enhanced by Redefine. The
transaction remains conditional upon the conclusion of debt funding agreements.
The Sedibelo Trust and its various wholly-owned subsidiaries which are parties to the agreement have
undertaken that for a period of 5 years from the effective date, the BBK SPV shall constitute a wholly-owned
subsidiary of the Sedibelo Trust; the Sedibelo Trust shall continue to operate for the benefit of its current body
of beneficiaries, comprising the Bakgatla-Ba Kgafela traditional community; each of the BBK Sedibelo Trust
and its various contracting wholly-owned subsidiaries shall continue to qualify as broad based black economic
empowerment entities; and the SPV shall continue holding the Fountainhead units.
At the time of conclusion of the term sheet Redefine did not envisage making a further offer to acquire the
Fountainhead property portfolio in the short to medium term and the transaction was intended to provide
Redefine with the benefit of enterprise development points while improving Fountainhead’s broad based black
economic empowerment credentials to the benefit of all Fountainhead unitholders (including Redefine).
However, if the current proposed acquisition by Redefine of the Fountainhead portfolio is implemented, the
Redefine shares received by the SPV will be subject to the same contractual commitments, undertakings and
restrictions, which will further enhance Redefine’s broad based black economic empowerment shareholding.
6 May 2015
Corporate advisor and sponsor
Java Capital
Independent reporting accountants
Grant Thornton
Date: 06/05/2015 03:30:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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