Wrap Text
Proposal to internalise management and acquire investment and asset management rights and cautionary announcement
INVESTEC AUSTRALIA PROPERTY FUND
Established in Australia and registered with ASIC as a managed investment scheme (ARSN 162 067 736)
Operated by Investec Property Limited (ACN 071 514 246; AFSL 290 909) (“Responsible Entity”)
Registered as a foreign collective investment scheme in terms of the Collective Investment Schemes Control Act
No.45 of 2002
Unit code: IAP
ISIN: AU0000046005
(IAP or the Fund)
Proposal to internalise management of IAPF and acquire investment and asset management rights to the TAP Fund and cautionary announcement
Further to the announcement made by Investec Property Limited (“Responsible Entity”) as responsible
entity for Investec Australia Property Fund (“IAPF”) on 10 June 2020, the Responsible Entity today
announces that it has entered into an implementation deed (“Implementation Deed”) with Investec
Bank plc and Investec Australia Limited, both members of the Investec Group (“Investec Group”) in
relation to a proposal to internalise the management function of IAPF by creating an internally managed
stapled group (“the Proposal”).
The key elements of the Proposal will involve:
• the stapling of a new registered managed investment scheme (“IAPF II” and together with IAPF,
the “IAPF Group”) to IAPF to form a new internally managed stapled group which will be listed
on the Australian Securities Exchange (“ASX”) and the Johannesburg Stock Exchange (“JSE”);
• an acquisition by IAPF II of the shares in Investec Australia Property Holdings Pty Limited
(“IAPH”) (being the holding company of the Responsible Entity, the manager of IAPF and
certain other entities that operate the business of IAPF), through which IAPF II will acquire the
management rights of IAPF;
• the transfer of the current IAPF management team to a subsidiary of IAPF II, which will provide
the staff and resources necessary for the management and day-to-day operations of IAPF;
• the establishment of a third party funds management platform through the acquisition of the
investment and asset management rights of Templewater Australia Property I, L.P. and its sub-
trusts (“TAP Fund”), a third-party fund with a broad mandate to invest in opportunistic
transactions in the Australian and New Zealand real estate markets. IAPF II will also provide
asset management services in respect of certain assets in which the Investec Group holds an
interest;
• a commitment by IAPF II to invest up to $30 million in the TAP Fund, which will take the form
of a loan initially, convertible into equity at IAPF II’s election; and
• the payment of consideration of $40 million(1) by IAPF II to the Investec Group to acquire the
management rights of IAPF as well as the management rights of the TAP Fund (“Total
Consideration”). The Total Consideration represents 9.0 times annualised forecast FY21
EBIT(2) of the assets and rights to management fee income that IAPF is acquiring.
(1) Subject to certain adjustments outlined in the Implementation Deed
(2) EBIT refers to earnings before interest and tax.
sharing protocol to ensure independent consideration of the Proposal and external legal, tax, financial
and accounting advisors were engaged to advise the Independent Directors in relation to the Proposal.
The Total Consideration and associated transaction costs of approximately $6.7 million will be funded
utilising IAPF’s existing debt facility. The investment in the TAP Fund will be funded by a new debt
tranche that will be added to the existing facility agreement of IAPF.
The Proposal is subject to the approval of unitholders (excluding the votes of members of the Investec
Group) by way of an ordinary resolution at the extraordinary general meeting (“Meeting”) to be held on
Tuesday, 17 November 2020 and the satisfaction or waiver of certain customary conditions precedent.
Independent Directors’ assessment and rationale for the Proposal
A committee comprising the independent directors of the Responsible Entity, being Richard Longes,
Sally Herman, Hugh Martin and Georgina Lynch (together, the “Independent Directors”), was formed
to consider the Proposal. The Independent Directors adopted a strict governance and information
The Independent Directors believe that the long-term interests of unitholders would be best served by
an internalised management structure. This would not only provide enhanced governance and increase
alignment of interests consistent with industry standards, but ensure the retention of the existing
management team and facilitate the future growth of IAPF. The Independent Directors acknowledge
that there may be potential risks and disadvantages associated with the Proposal but consider that the
advantages of the Proposal outweigh the disadvantages and risks. The advantages, disadvantages and
risks will be set out in the Booklet (defined below) to be dispatched to unitholders in connection with the
Meeting.
Independent Expert’s Report
The Independent Directors have appointed Deloitte Corporate Finance Pty Limited (“Independent
Expert”) to prepare an Independent Expert’s Report on the Proposal. The Independent Expert has
concluded that the Proposal is fair and reasonable to, and in the best interests of, unitholders not
associated with the Investec Group.
Details of the Independent Expert’s opinion and the basis for the Independent Expert’s conclusions,
including its valuation methodology and analysis, will be set out in the Independent Expert’s Report,
which will be included in the Booklet (defined below) to be dispatched to the unitholders.
Implementation Deed
The key terms of the Implementation Deed include:
• conditions precedent which must be satisfied or waived for the Proposal to proceed;
• circumstances under which the Responsible Entity or the Investec Group may terminate the
Implementation Deed;
• detailed stapling steps, acquisition steps and restructure steps to be implemented in connection
with the Proposal;
• customary restrictions on conduct of business by IAPH and its subsidiaries prior to the
implementation of the Proposal;
• no shop, no talk and notification obligations on the Responsible Entity and the Investec Group;
and
• representations, warranties and indemnities given by the Investec Group in relation to IAPH
and its subsidiaries which are customary for a transaction of this nature.
A summary of the conditions precedent to the implementation of the Proposal, termination rights for the
Responsible Entity and the Investec Group, payments to be made by the Investec Group to the
Responsible Entity and no shop, no talk and notification obligations are set out in the Annexure. A more
detailed summary of the Implementation Deed will be included in the Booklet (defined below).
Explanatory Memorandum, Notice of Meeting and Product Disclosure Statement
Unitholders will receive a combined Explanatory Memorandum, Notice of Meeting and Product
Disclosure Statement (“Booklet”). The Booklet will include a more detailed explanation of the Proposal,
including the basis for the Independent Director’s recommendation, advantages, disadvantages and
risks of the Proposal and financial consequences of the Proposal, and a copy of the Independent
Expert’s Report.
The Notice of Meeting, which includes details of the extraordinary general meeting and how to vote on
the resolution to approve the Proposal, will be sent to unitholders as part of the Booklet.
It is expected that the Booklet will be dispatched to unitholders on Tuesday, 20 October 2020 following
receipt of formal approval by the JSE. Unitholders should read the Booklet before deciding how to vote
on the Proposal.
Key dates
Event Indicative date
Dispatch the Booklet to unitholders Tuesday, 20 October 2020
Meeting date 5.00pm (Sydney time) / 8.00am (Johannesburg time) on
Tuesday, 17 November 2020
If the Proposal is approved by unitholders and all other conditions precedent in connection
with the Proposal are fulfilled:
Implementation date Monday, 30 November 2020
Note: The timetable above is indicative only and may change without notice. Any changes to the above timetable will be
announced through the ASX and the JSE and on IAPF’s website at www.iapf.com.au.
Further details on the timetable of the Proposal will be included in the Booklet to be dispatched to
unitholders and released to the ASX and the JSE on the dispatch date.
The Independent Directors have been advised by JP Morgan (Australia) Limited and Macquarie Capital
(Australia) Limited as financial advisors and King & Wood Mallesons as legal counsel in Australia and
Investec Bank Limited as financial advisor and Cliffe Dekker Hofmeyr as legal counsel in South Africa.
Categorisation of the Proposal
The Proposal has been categorised as a related party transaction in terms of the JSE Listings
Requirements on the basis that the Responsible Entity is a related party of Investec Bank plc by virtue
of Investec Bank plc being the ultimate holding company of Investec Property Management Pty Limited,
the manager of IAPF.
Cautionary
Unitholders should exercise caution when dealing in the units of IAPF until the Booklet is released on
the ASX and the JSE and dispatched to unitholders. Unitholders should review the Booklet in full, and
consult their stockbroker, accountant, or financial, tax or legal adviser if they are uncertain about the
impact of the Proposal on their particular investment objectives.
A copy of the announcement released to the ASX will available for inspection by unitholders using the
following link:
https://www2.asx.com.au/markets/company/IAP
Johannesburg
15 October 2020
Investment Bank and Sponsor
Investec Bank Limited
Annexure – Terms of the Implementation Deed
Parties The Responsible Entity as responsible entity of IAPF I and IAPF II, Investec Bank plc (“Seller”) and
Investec Australia Limited (“Investec Australia”)
Conditions precedent The conditions precedent of the Proposal set out in the Implementation Deed are as follows:
(a) (Unitholder approval) the Unitholders approving the resolution to approve the Proposal
by the requisite majorities at the meeting of the Unitholders;
(b) * (Independent Expert) the Independent Expert’s Report concluding that the Proposal is
fair and reasonable to, and in the best interests of, the non-associated Unitholders, and
the Independent Expert not changing its conclusion or withdrawing its report prior to the
Meeting;
(c) (regulatory approval) all necessary regulatory approvals having been obtained on terms
which are acceptable to the Responsible Entity or, where the approval is reasonably likely
to have a materially adverse impact on the Investec Group, on terms which are acceptable
to both the Responsible Entity and the Seller;
(d) (no regulatory action) as at 9.00am on the Implementation Date, there being no
preliminary or final decision issued by a government agency and no application being made
to any government agency, or action or investigation being announced, threatened or
commenced by a government agency, which restrains, prohibits or otherwise materially
adversely affects the implementation of the Proposal;
(e) (legal restraints) as at 9.00am on the Implementation Date, no court issuing a final and
non-appealable order or taking any other action which permanently restrains or prohibits
the Proposal, or there being any other material legal restraint or prohibition preventing
the implementation of the Proposal;
(f) (third party consents) all other third party approvals which the parties agree are
reasonably necessary to implement the Proposal being obtained on terms which are
acceptable to the Responsible Entity or, where the approval is reasonably likely to have a
materially adverse impact on the Investec Group, on terms which are acceptable to both
the Responsible Entity and the Seller;
(g) * (employment arrangements) key management personnel executing the management
employment agreements; and
(h) (Restructure Steps) the restructure steps specified in Schedule 2 of the Implementation
Deed being completed in accordance with that schedule.
The conditions with an “*” are for the benefit of, and may be waived by, the Responsible Entity
only.
Termination rights Either the Responsible Entity or the Seller may terminate the Implementation Deed in the
following circumstances:
• at any time immediately by written agreement between the parties;
• at any time before the Meeting Date, if the Independent Directors decline to
recommend, withdraw or adversely modify their recommendation of the Proposal in
circumstances permitted under the deed;
• if the Proposal is not approved by the requisite majorities at the meeting of the
Unitholders; or
• if any of the conditions precedent are not satisfied or waived by the dates specified
in the Implementation Deed, including if the condition precedent to obtain
regulatory approvals is not satisfied by the end date of 31 March 2021.
The Responsible Entity may terminate the Implementation Deed in the following circumstances:
• at any time if the Seller or Investec Australia is in material breach of the
Implementation Deed which is not remedied by the earlier of 5 business days after it
receives a notice setting out the breach or the scheduled time for completion;
• at any time if the Seller is in breach of its no shop or no talk obligations;
• at any time if the Seller, Investec Australia or any of IAPH or its subsidiaries becomes
insolvent; or
• at any time if a prescribed event set out in the Implementation Deed occurs, other
than to the extent the Independent Directors directly caused the occurrence of the
prescribed event.
The Seller may terminate the Implementation Deed in the following circumstances:
• at any time if the Responsible Entity is in material breach of the Implementation
Deed which is not remedied by the earlier of 5 business days after the it receives a
notice setting out the breach or the scheduled time for completion;
• at any time if IAPF becomes insolvent; or
• at any time if the Responsible Entity is in breach of its no shop or no talk obligations.
Retention payments Investec Australia agrees to pay $2.66 million to the Responsible Entity (on behalf of the
employer) in connection with the existing retention scheme established by Investec Australia.
The maximum retention payments payable to all employees participating in the retention
scheme is, in aggregate, $3,474,159 (excluding payroll tax). Subject to receipt of this amount
from Investec Australia, the employer will be responsible for paying the retention payments to
the relevant employees as and when they become payable in accordance with the terms and
conditions of the retention scheme.
TAP Fund make-whole payment The Seller also undertakes to compensate the Responsible Entity on a pro rata basis if the
annualised revenue in connection with the TAP Fund for FY21, comprising asset management
fees and investment management fees, is less than the annualised costs in connection with the
TAP Fund for FY21 of $2.6 million. If the revenue earned in connection with the TAP Fund during
the period from the Implementation Date to 31 March 2021 is less than the costs incurred in
connection with the TAP Fund for that period (being $2.6 million pro rated by the number of
days from the Implementation Date to 31 March 2021), the Seller will pay the shortfall to the
Responsible Entity.
No shop, no talk and notification The Seller must not:
obligations • until the earlier of the Implementation Date and the Responsible Entity commencing
discussions in relation to a Competing Proposal (where permitted to do so in
accordance with the exclusion to the no talk obligations described below), initiate,
induce, solicit or invite any enquiries, negotiations or discussions with a view to
obtaining any offer, proposal or expression of interest from any third party in relation
to an IAPH Competing Transaction; or
• until the earlier of the Implementation Date and the Responsible Entity commencing
discussions in relation to a Competing Proposal (where permitted to do so in
accordance with the exclusion to the no talk obligations described below), negotiate
or enter into, or participate in negotiations or discussions with any other person
regarding an IAPH Competing Transaction, or otherwise provide any person with
information or respond to inquiries that may lead to an IAPH Competing Transaction.
The Responsible Entity must:
• until the Implementation Date, not initiate, induce, solicit or invite any enquiries,
negotiations or discussions with a view to obtaining any offer, proposal or expression
of interest from any third party in relation to a Competing Proposal;
• until the Implementation Date, not negotiate or enter into, or participate in
negotiations or discussions with any third party in relation to a Competing Proposal;
or
• until the Implementation Date, inform the Seller within 2 Business Days if it receives
a Competing Proposal.
However, the no talk obligations do not apply to the Responsible Entity to the extent that they
restrict the Responsible Entity from taking or refusing to take any action with respect to a
Competing Proposal, provided that the Responsible Entity or the Independent Directors have
determined that such Competing Proposal could reasonably be considered to become a Superior
Proposal and have received external legal advice that failing to respond to such a Competing
Proposal would breach the Responsible Entity’s or the Independent Director’s fiduciary or
statutory obligations.
“IAPH Competing Transaction” means any transaction which if completed would result in a third
party:
• directly or indirectly, acquiring a relevant interest in, or becoming the holder of, 50%
or more of the shares in IAPH or any of its subsidiary, or all or a substantial part of
IAPH’s business, including by way of capital reduction, sale of assets, sale of shares
or joint venture, but not as a custodian, nominee or bare trustee;
• directly or indirectly, acquiring control of IAPH or any of its subsidiary within the
meaning of section 50AA of the Corporations Act 2001 (Cth); or
• directly or indirectly, acquiring any rights or interests in relation to any asset,
property or investment management arrangement relating to IAPF (including legal,
beneficial or economic interests,
or any merger or amalgamation (whether by way of takeover or other arrangement), acquisition
or sale of substantial business or assets, issue of securities, reorganisation of capital or similar
transaction involving IAPH or any of its subsidiary, or any combination of them.
“Competing Proposal” means any proposal by a third party in relation to a transaction or
arrangement under which if such transaction or arrangement is completed:
• a person would acquire (directly or indirectly) or become the holder of, or otherwise
have a right to acquire or have an economic interest in the whole or a substantial
part of the business conducted by IAPF or its assets or its related bodies corporate;
• a person would acquire a relevant interest in, or voting power of, 50% or more of all
IAPF units on issue;
• a person would acquire (directly or indirectly) control of IAPF within the meaning of
section 50AA of the Corporations Act 2001 (Cth);
• a person would otherwise acquire, or merge or amalgamate with, IAPF; or
• IAPF would be required to abandon or otherwise fail to proceed with the Proposal.
“Superior Proposal” means a bona fide Competing Proposal which the Independent Directors
have determined, in good faith after consultation with their external professional advisors, is in
their reasonable opinion:
• reasonably capable of being completed, taking into account all aspects of the
Competing Proposal and the person making it; and
• more favourable to the Unitholders (as a whole) than the Proposal, taking into
account all the terms and conditions of the Competing Proposal.
Date: 15-10-2020 08:20:00
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