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Investment by Brimstone in FPG Property Fund
Brimstone Investment Corporation Limited
(Incorporated in the Republic of South Africa)
Registration number 1995/010442/06
Share Code: BRT ISIN: ZAE000015277
Share Code: BRN ISIN: ZAE000015285
(“Brimstone” or the “Company”)
INVESTMENT BY BRIMSTONE IN FPG PROPERTY FUND
1. Introduction
Brimstone shareholders are advised that Brimstone has, through its wholly-owned subsidiary Newshelf 1416
Proprietary Limited, entered into a subscription agreement (“Subscription Agreement”) and a relationship
agreement (“Relationship Agreement”), both dated 16 December 2017, with FPG Investments Proprietary
Limited (“FPG Investments”) and its wholly-owned subsidiary FPG Property Fund Proprietary Limited (“FPG
Property Fund” or “Fund”) pursuant to which Brimstone will invest in the Fund, a Cape-based black-owned and
managed unlisted property fund with a portfolio of properties (“Properties”) catering for the retail, industrial and
office sectors (“Transaction”).
An initial investment is being made in terms of the Subscription Agreement, and involves a subscription for an
approximate 10% shareholding in FPG Property Fund for a maximum consideration of R140 million
(“Subscription Consideration”). The total consideration for the Transaction will be determined on the closing
date (“Closing Date”), being the first day of the calendar month immediately succeeding the month in which the
conditions precedent set out in paragraph 4 below, are fulfilled or waived. The Subscription Consideration will be
based on the net asset value per share of the Fund on the Closing Date and will be settled by Brimstone in cash
from available facilities. The effective date of the Transaction is expected to be 1 February 2018.
In terms of the Relationship Agreement, for so long as Brimstone holds less than 20% of the issued share capital
of the Fund, Brimstone shall have a right of first refusal to subscribe for additional shares in the Fund should the
board of directors of the Fund resolve to procure additional funding by way of an issue of shares. This right shall
terminate on the date upon which Brimstone becomes the holder of 20% of the Fund’s issued share capital.
2. Description of FPG Property Fund
FPG Property Fund is principally a property-owning entity with a diverse portfolio of Properties in the retail,
industrial and office sectors. FPG Property Fund also provides a full spectrum of property services to its
Properties.
The Properties are not only located in South Africa but the Fund also has exposure to the United Kingdom, through
its wholly-owned subsidiary FPG UK Limited, where it has invested in retail properties and is developing and
renovating residential properties.
FPG Property Fund currently owns 37 properties in South Africa, mainly located in the greater Cape Town area,
with a total gross lettable area of approximately 200,000 square metres. The Fund also has a portfolio of 8
properties in the United Kingdom with a total gross lettable area of approximately 10,000 square metres. A full
list of the Properties, together with additional detail such as property description, rentable area, age of buildings
and vacancies, will be included in the Valuation Report referred to in paragraph 5.2 below.
In addition to the Properties, FPG Property Fund holds a portfolio of shares in companies listed on the JSE
Limited (“JSE”) with a current market value of c. R42 million.
The value of the net assets that are the subject of the Transaction were R1 041.4 million as at 30 June 2017. The
profits attributable to the net assets that are subject of the Transaction were R74.4 million for the 6 months ended
30 June 2017.
3. Rationale for the Transaction
The Transaction increases Brimstone’s exposure to property by adding a property portfolio with a high
representation of national tenants, low vacancy rate, positive growth in trading density, active management of
properties and a proven total return track record of outperforming the benchmark MCSI IPD South Africa Annual
Property Index.
Over the last 10 years, FPG Property Fund has established a portfolio of neighbourhood convenience and value
centres targeting a broad range of communities. Many of the properties are anchored by blue-chip tenants and
the major supermarket chains. Across the total portfolio, more than 70% of tenants have a national presence
giving the Fund a strong and stable contractual rental base.
The investment by Brimstone will enable FPG Property Fund to accelerate its growth trajectory, as Brimstone’s
equity subscription will be used to fund new acquisitions and the Fund’s development pipeline. Brimstone
considers this strategic investment to be a meaningful addition to its existing property investments, which include
its six properties in Salt River, Epping, and Northcliff, and its investment in Equites Property Fund Limited.
4. Conditions precedent
The Transaction is subject to the fulfilment or waiver, as the case may be, of the following remaining conditions
precedent:
4.1 by no later than 19 January 2018, the Fund has delivered to Brimstone a warranty disclosure schedule
(“Disclosure Schedule”), and Brimstone has confirmed that such schedule constitutes the Disclosure
Schedule for purposes of the Subscription Agreement;
4.2 by no later than the third business day following 19 January 2018, Brimstone has delivered to FPG
Investments a written notice stating that Brimstone is satisfied with the results of a tax and legal due
diligence investigation of FPG Property Fund and its subsidiaries (“FPG Group”) and wishes to proceed
with the Transaction;
4.3 by no later than 17h00 on 29 January 2018, any bank, financial institution or other debt provider to the FPG
Group has provided such consents and approvals, in writing, as may be required under any relevant debt
funding agreements in terms whereof any debt funding is provided to the FPG Group (“Debt Funding
Agreements”), in order for the Transaction to be able to be effected without triggering any event of default
or other potential adverse consequence under the Debt Funding Agreements;
4.4 by no later than 29 January 2018, and only if applicable, Brimstone has (i) obtained a fairness opinion in
accordance with the JSE Listings Requirements, which opinion confirms that the Transaction is fair insofar
as the Brimstone shareholders are concerned, (ii) obtained the requisite approvals from its shareholders,
the JSE and any other regulatory authority for the implementation of the Transaction, and (iii) has complied
with all the requirements of section 10 (transactions with related parties) of the JSE Listings Requirements;
4.5 by no later than 17h00 on 29 January 2018, the receipt of all necessary approvals that may be required
from the Financial Surveillance Department of the South African Reserve Bank in connection with the
Transaction;
4.6 by no later than 17h00 on 29 January 2018, FPG Investments, in its capacity as sole shareholder of FPG
Property Fund, has passed a special resolution to amend the existing memorandum of incorporation, to
the extent required, and such special resolution and any applicable notice of amendment required in terms
of the Companies Act, No 71 of 2008, as amended (“Companies Act”) have been filed in the manner
prescribed by the Companies Act; and
4.7 by no later than 17h00 on 29 January 2018, the directors of FPG Property Fund have resolved to issue the
subscription shares for the Subscription Consideration.
5. Small related party transaction
The Transaction is classified as a “small related party” transaction in terms of paragraphs 10.1 and 10.7 of the
JSE Listings Requirements as Brimstone is transacting with FPG Property Fund, which is an associate (as defined
in the JSE Listings Requirements) of Liyaqat Allie Parker, a director of Brimstone and a director of, and indirect
shareholder in, FPG Property Fund.
5.1 Independent expert’s opinion
In terms of paragraph 10.7(b) of the JSE Listings Requirements, Brimstone is required to appoint an
independent expert (“Independent Expert”) and provide the JSE with written confirmation from the
Independent Expert (“Independent Expert’s Opinion”) that the terms of the Transaction are fair insofar
as the shareholders of Brimstone are concerned.
Brimstone is currently in the process of finalising the appointment of the Independent Expert and a further
announcement (“Further Announcement”) will be released on SENS in due course once the Independent
Expert’s Opinion has been finalised and is available for inspection.
5.2 Valuation report
As the Transaction involves property, Brimstone has appointed Mills Fitchet Magnus Penny as the
independent registered valuer (“Independent Valuer”) to provide an independent valuation report in
respect of the Properties (“Valuation Report”). The Independent Valuer is currently in the process of
finalising the Valuation Report and details of the value of the Properties will be disclosed in the Further
Announcement.
19 December 2017
Cape Town
Investment Bank, Corporate Advisor and Sponsor
Nedbank Corporate and Investment Banking
Legal Advisor
Cliffe Dekker Hofmeyr Inc.
Date: 19/12/2017 01:58:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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