To view the PDF file, sign up for a MySharenet subscription.

FORTRESS REIT LIMITED - Fortress BEE initiative

Release Date: 04/07/2019 17:31
Code(s): FFB FFA FIFB12 FIFB15 FIFC33 FIFB10 FIFB11 FIFB14     PDF:  
 
Wrap Text
Fortress BEE initiative

FORTRESS REIT LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 2009/016487/06)
JSE share codes:   FFA   ISIN: ZAE000248498
                   FFB   ISIN: ZAE000248506
Bond company code: FORI
(Approved as a REIT by the JSE)
("Fortress")


FORTRESS BEE INITIATIVE


1.   INTRODUCTION

     Shareholders are referred to the TRP 121 notification announcement published on SENS on 4 July 2019
     and are advised that the Siyakha Education Trust has disposed of its entire shareholding in Fortress
     (being 97 224 065 Fortress B shares) to four Black Economic Empowerment ("BEE") entities, being
     Fortress Empowerment 1 Proprietary Limited ("Fortress Empowerment 1"), Fortress Empowerment 2
     Proprietary Limited ("Fortress Empowerment 2"), Fortress Empowerment 3 Proprietary Limited
     ("Fortress Empowerment 3") and Fortress Empowerment 4 Proprietary Limited ("Fortress
     Empowerment 4") (collectively, "the Fortress Empowerment Vehicles") on loan account for an
     aggregate consideration of R1 175 438 946 (which equates to R12.09 per Fortress B share) ("the
     Siyakha Loan Claim").

     Shareholders are further advised that the Siyakha 2 Education Trust has disposed of its entire
     shareholding in Fortress (being 31 171 516 Fortress B shares) to Fortress Empowerment 1 on loan
     account for a consideration of R376 863 628 (which equates to R12.09 per Fortress B share) ("the
     Siyakha 2 Loan Claim").

     Reference to Fortress in this announcement includes Fortress and its wholly-owned subsidiaries.

2.   SETTLEMENT OF LOANS

     The liabilities of each of the Siyakha Education Trust and Siyakha 2 Education Trust (collectively or
     individually, a "Trust/s") exceed their assets. After considering the current economic environment, the
     board of directors of Fortress has assessed the possibility of the market value of the Fortress B shares
     increasing to or exceeding the amount of the loan obligations owed by each of the Siyakha Education
     Trust and Siyakha 2 Education Trust to Fortress as remote and, accordingly, Fortress has agreed to
     accept the assignment by the Siyakha Education Trust and the Siyakha 2 Education Trust of the Siyakha
     Loan Claim and the Siyakha 2 Loan Claim as settlement for the balance of the loans owing by each of
     the Siyakha Education Trust and the Siyakha 2 Education Trust. The effect of the assignment will be
     that each Trust, which collectively owe Fortress c.R4 billion, will be released and discharged from any
     liability to pay any amounts in respect of those loans.

3.   FORTRESS BEE INITIATIVE

     Shareholders are referred to special resolution number 3 contained in the notice of annual general
     meeting included in Fortress' integrated annual report for the year ended 30 June 2017, which resolution
     was approved by shareholders at the annual general meeting of Fortress shareholders held on
     1 November 2017 ("the resolution"). The resolution gives Fortress the authority to provide any form of
     financial assistance for the purchase of shares in Fortress to any trust, company and/or other third party
     for the purpose of, or in connection with, the promotion of Black Economic Empowerment in relation
     to Fortress, subject to the following parameters:
     -   the capital amount (excluding interest, costs, charges, fees and expenses) of any such financial
         assistance may not in aggregate exceed R2.9 billion;
     -   financial assistance may be provided for any period, but not exceeding 10 years from the effective
         date on which it is provided; and
     -   Fortress may provide financial assistance on such arm's length terms as it in its discretion considers
         appropriate for the nature of the financial assistance, provided that on any loan advanced by Fortress
         for the acquisition of shares in Fortress it shall agree a return at least equivalent to the dividends
         received and expected to be received on such shares, plus an additional return at least equivalent to
         49% of the performance of such shares over the duration of the loan.

     Pursuant to the above authority, shareholders are advised that Fortress, through one of its subsidiaries,
     has provided financial assistance to the Fortress Empowerment Vehicles to settle the Siyakha Loan
     Claim and the Siyakha 2 Loan Claim ("the empowerment transaction"). The empowerment transaction
     is consistent with Fortress' stated priority to assist with the restructuring of the Siyakha Education Trust
     and the Siyakha 2 Education Trust and formulate a new BEE strategy.

     The shareholders of the Fortress Empowerment Vehicles are as follows:

     -   Meshanthan Pillay (being the sole shareholder of Fortress Empowerment 1 and Fortress
         Empowerment 2), who is the founder of, and Chief Executive Officer, at YW Investments
         Proprietary Limited ("YW Investments"), an empowered financial services and investments
         company. YW Investments is one of the only 100% black-owned financial services companies
         operating across international markets with a specialisation in equity and equity-linked capital
         markets advisory. YW Investments also holds investments in real estate, resources, ICT and across
         other sectors; and
     -   Jade Capital Partners Proprietary Limited (being the sole shareholder of Fortress Empowerment 3
         and Fortress Empowerment 4), a 100% black-women owned and managed investment holding
         company founded in 2013 by Zola Malinga and Bukelwa Bulo. The primary focus of the company
         is investments in the property sector, including direct property and property services companies.

4.   SALIENT DETAILS OF THE EMPOWERMENT TRANSACTION

     The effective date of the empowerment transaction is 28 June 2019.

     The empowerment transaction has been structured as follows:

     -   Fortress Empowerment 1 and Fortress Empowerment 3
           -     In settlement of its loan claim, Fortress Empowerment 1 will issue to Fortress preference
                 shares to the value of R388 075 653.
           -     In settlement of its loan claim, Fortress Empowerment 3 will issue to Fortress preference
                 shares to the value of R388 075 641.
           -     The preference shares carry a zero coupon.
           -     The preference shares will be redeemed at face value on the redemption date, being 10 years
                 from issue, but may be redeemed earlier at the option of either Fortress Empowerment 1 or
                 Fortress Empowerment 3 (as applicable) or Fortress (but not within the first three years of
                 the issue date).
           -     Fortress Empowerment 1 and Fortress Empowerment 3 each waives its right to dividends on
                 the Fortress B shares that it holds.
           -     On the redemption date, the preference shares will pay a dividend equal to 70% of the
                 increase in the market value of the Fortress B share above R12.09 to Fortress. To the extent
                 that the shareholder of Fortress Empowerment 1 or Fortress Empowerment 3 (as applicable)
                 injects equity into the vehicle, the dividend will be adjusted accordingly but Fortress' share
                 of the dividend may not be less than 49% of the increase in market value above R12.09.
            -    On the redemption date, if the market value of the Fortress B shares is less than R12.09, the
                 redemption value will be the then Fortress B share price (calculated as the 5-day VWAP of
                 the Fortress B shares) on the redemption date multiplied by the number of Fortress B shares
                 funded by the preference shares.

     -   Fortress Empowerment 2 and Fortress Empowerment 4
           -     Fortress Empowerment 2 is funded by way of a loan from Fortress to the value of
                 R388 075 641.
           -     Fortress Empowerment 4 is funded by way of a loan from Fortress to the value of
                 R388 075 641.
           -     Each loan does not bear any interest unless certain interest accrual events occur, in which
                 case interest will accrue only pursuant to that Interest Accrual Event (as defined below) and
                 subject to certain conditions.
           -     The loans are repayable on the earlier of (i) a change in control of Fortress Empowerment 2
                 or Fortress Empowerment 4 (as applicable); or (ii) the date on which Fortress Empowerment
                 2 or Fortress Empowerment 4 (as applicable) disposes of the Fortress B shares that it holds;
                 or (iii) 18 months from the provision of the loan.
           -     Fortress Empowerment 2 and Fortress Empowerment 4 each waives its right to dividends on
                 the Fortress B shares that it holds.
           -     In the event that there is (a) a change in control; or (b) Fortress Empowerment 2 or Fortress
                 Empowerment 4 (as applicable) disposes of its Fortress B shares; or (c) 18 months have
                 lapsed and provided that on such date the assets of Fortress Empowerment 2 or Fortress
                 Empowerment 4 (as applicable) exceed its liabilities (whichever is earlier) (an "Interest
                 Accrual Event"), the loans shall, pursuant to such an Interest Accrual Event occurring,
                 accrue interest in arrears at a rate equal to the appreciation in the market value of the Fortress
                 B shares (being the increase in the market value of the Fortress B share above R12.09), if
                 any, calculated from the date that Fortress Empowerment 2 or Fortress Empowerment 4 (as
                 applicable) acquired the Fortress B shares to the date of the change in control or the date of
                 disposal or the date on which the 18 month period has lapsed (as applicable).
           -     The intention is to introduce a new B-BBEE shareholder into these vehicles in due course.

5.     FINANCIAL CONSIDERATIONS

       For as long as the Fortress Empowerment Vehicles remain funded in accordance with the empowerment
       transaction terms, the empowerment transaction does not result in any dilution to distributable earnings
       per Fortress A share and Fortress B share and as such, the guidance communicated at the pre-close call
       held on 31 May 2019 remains unchanged.

6.     VOLUNTARY ANNOUNCEMENT

       The provision of financial assistance by Fortress to the Fortress Empowerment Vehicles was previously
       approved by shareholders at the annual general meeting of Fortress shareholders held on
       1 November 2017 and is not a categorisable transaction in terms of the JSE Listings Requirements. As
       such, this announcement is voluntary and for information purposes only.

4 July 2019


Lead sponsor
Java Capital

Joint sponsor
Nedbank Corporate and Investment Banking

Legal advisor
DLA Piper 
Date: 04/07/2019 05:31:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
 the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, 
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
 information disseminated through SENS.

Email this JSE Sens Item to a Friend.

Share This Story