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REBOSIS PROPERTY FUND LIMITED - B-BBEE Transaction in respect of New Frontier Properties Limited

Release Date: 31/08/2017 17:44
Code(s): REB REA     PDF:  
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B-BBEE Transaction in respect of New Frontier Properties Limited

REBOSIS PROPERTY FUND LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 2010/003468/06)
JSE share codes:
REA ISIN: ZAE000240552
REB ISIN: ZAE000201687
(Approved as a REIT by the JSE)
(“Rebosis”)


B-BBEE TRANSACTION IN RESPECT OF NEW FRONTIER PROPERTIES LIMITED


1.   INTRODUCTION

     Rebosis shareholders are advised that Rebosis has reduced its interest in New Frontier
     Properties Limited (“New Frontier”) from 67.6% to 36%, by disposing of 48 284 681
     New Frontier shares to a special purpose vehicle (“the BEE SPV”) owned by a South
     African broad-based black economic empowerment consortium (the “B-BBEE
     Consortium”) on a vendor-funded basis (“the Transaction”).

2.   THE TRANSACTION

     Strategic Rationale

     New Frontier is a Mauritian-incorporated company, which operates as a property
     income fund with a portfolio focus on the United Kingdom and Europe. Its shares are
     listed on the Mauritian Stock Exchange and are also inwardly listed on the securities
     exchange operated by the JSE Limited ("JSE").

     Prior to the implementation of the Transaction Rebosis held an approximately 67.6%
     shareholding in New Frontier. Rebosis considers its investment in New Frontier as
     important and strategic in nature, and its current intention is to maintain a material and
     influential stake in New Frontier. However, Rebosis does not consider it necessary for it
     to maintain a controlling position in New Frontier.

     The Transaction addresses the following strategic objectives for Rebosis:

       -   the Transaction achieves a de-consolidation of New Frontier for accounting
           purposes and an improvement of IFRS gearing levels of the Rebosis group;
       -   it is a significant transaction which contributes to B-BBEE in the property sector,
           and is in furtherance of Rebosis' commitment to transformation in South Africa as
           well as its own strategic B-BBEE objectives;
       -   it is a further step in the process of restructuring and optimising the balance sheet
           of Rebosis; and
       -   it creates sufficient capacity for Rebosis to again acquire additional interests in
           New Frontier should it wish to do, but without thereby acquiring a majority
           controlling position.

     The B-BBEE Consortium is chaired by Nkosi-Yawo Gugushe and will be 100% black,
     and will include significant participation by women and broad-based organisations.


The Salient terms of the Transaction

The salient terms of the Transaction are as follows:

 -   Rebosis disposed of 48 284 681 New Frontier shares ("the New Frontier
     Shares") to the BEE SPV at a price of R19.00 per share (which equates to the 30
     day V-WAP price of New Frontier shares), i.e. for a total consideration of R917
     million, with effect from 31 August 2017;
 -   the BEE SPV is entitled to all future distributions in respect of the New Frontier
     Shares, including the as yet undeclared distribution in respect of the 6-month
     period commencing on 1 March 2017 and ending on 31 August 2017;
 -   Rebosis advanced a loan to the BEE SPV to enable it to fund the acquisition of
     the New Frontier Shares (the "Vendor Loan");
 -   the B-BBEE Consortium is making an equity contribution to BEE SPV which will
     be applied in reduction of the amount owing under the Vendor Loan and which
     represents risk capital in relation to the Transaction;
 -   the Vendor Loan bears interest at a rate equal to prime plus 1% (capitalised and
     compounded monthly), with effect from 1 March 2017, and the BEE SPV is
     required to apply all distributions received in respect of the New Frontier Shares in
     reduction of the outstandings under the Vendor Loan from time to time;
 -   Rebosis is entitled to a profit share of 20% on any value upside (whether
     attributable to share price and/or currency movement) at the end of the Vendor
     Loan term, to the extent that this exceeds any amount of accrued interest that
     may not have been paid during the term of the Vendor Loan though the
     application of distributions;
 -   the Vendor Loan has a maturity of 5 years, which may be extended by a further
     maximum period of 5 years;
 -   the New Frontier Shares serve as security for the obligations under the Vendor
     Loan, and the New Frontier Shares may not be disposed of until the Vendor Loan
     is repaid;
 -   it is contemplated that the Vendor Loan or a portion thereof may be substituted by
     funding provided by a third party or financial institution in due course (and the
     parties are currently in the process of negotiating such funding); and
 -   Rebosis has pre-emptive and related rights in respect of the New Frontier Shares.

The agreements relating to the Transaction contain such other terms and conditions as
are common and typical for agreements of this nature.

Financial effects of the Transaction

Prior to the disposal of New Frontier Shares, Rebosis (through its wholly owned
subsidiaries) owned 103 283 591 shares in the share capital of New Frontier, being
67.6% of the total number of issued shares. As a result, Rebosis consolidated New
Frontier on a line-by-line basis in both the Statement of Profit or Loss and other
Comprehensive Income and the Statement of Financial Position.

After the implementation of the Transaction Rebosis (through its wholly owned
subsidiaries) owns 54 998 910 shares in New Frontier, which equates to a 36%
shareholding. Subsequent to this disposal, New Frontier will be treated as an associate
of Rebosis and will henceforth equity account for as an investment in an associate.

Based on the interim financial results published by New Frontier on 13 April 2017, the
equity accounted profits, had the Transaction been effected on 1 September 2016,
would have been R45 356 824, which represents a 36% profit entitlement.

The New Frontier shares have been sold cum dividend (which includes the distributions
for all periods commencing on 1 March 2017), and hence it is a term of the Vendor
Loan that the interest period commences 1 March 2017 to coincide with the dividend
entitlement period.

New Frontier’s last published results for the 9 months ended 31 May 2017 reflect profit
after tax for the period of £7.459 million and a net asset value of 7.2 pence per share.
The properties owned by New Frontier are as follows:


     Property       Location          Rentable         Acquisition   Valuation     Weighted
                                      Area             date          as at 31      average
                                      sq ft                          August        rental per
                                                                     2016 (GBP)      sq ft
     Coopers        Burton     upon   396,504          14 April      94     350    GBP15.65
     Square         Trent (UK)                         2015          000
     The            Middlesbrough     392,993          14 April      80     000    GBP13.66
     Cleveland      (UK)                               2015          000
     Centre
     Houndshill     Blackpool (UK)    301,959          23            98      500   GBP20.88
     Shopping                                          September     000
     Centre                                            2015
                                      1,091,456                      272     850
                                                                     000

     The above properties were valued on 31 August 2016 by an independent valuer,
     Colliers International Valuation UK LLP.


3.   EFFECTIVE DATE AND CONDITIONS PRECEDENT TO THE TRANSACTION

     The Transaction is not subject to any outstanding conditions precedent and it became
     effective and was implemented on 31 August 2017.

4    CLASSIFICATION OF THE PROPOSED TRANSACTION

     The Transaction is classified as a Category 2 transaction in terms of the Listing
     Requirements of the JSE.

5.   CONCLUSION

     Rebosis is pleased to have concluded the Transaction which effectively improves its
     balance sheet and fulfils its B-BBEE objectives in a meaningful manner.

     Rebosis has confidence in the future of New Frontier and its management and will
     continue to support New Frontier’s initiatives and drives in fulfilling its strategy.


31 August 2017


Legal advisor
Cliffe Dekker Hofmeyr Inc.


Sponsor
Rand Merchant Bank (A division of FirstRand Bank Limited)

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