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RDF - Redefine Income Fund Limited - Black Economic Empowerment transaction
Redefine Income Fund Limited
(Registration No. 1999/018591/06)
Share Code: RDF & ISIN Code: ZAE000023503
("Redefine")
BLACK ECONOMIC EMPOWERMENT TRANSACTION
1. INTRODUCTION
Redefine has reached agreement to give effect to a Black Economic Empowerment
("BEE") transaction (the "BEE transaction") in terms of which 80 million
Redefine linked units ("BEE units") (constituting just under 10% of the current
issued linked units in Redefine) are to be issued to a selection of strategic
and broad-based BEE parties.
The BEE transaction constitutes an integral part of Redefine`s commitment to BEE
and to the principles of the Property Charter. Following its implementation (and
taking into account the Redefine linked units currently held by BEE parties)
approximately 15.5% of the Redefine linked units will be held by BEE parties.
2. THE BEE TRANSACTION
The BEE transaction will entail the issue of 80 million Redefine linked units
for an aggregate cash amount of R548 million to selected strategic and broad-
based BEE participants. 48 million of the BEE units will be issued to strategic
empowerment partners, while the remaining 32 million will be issued to broad-
based empowerment partners.
The linked units are to be issued at a price of R6,85 per linked unit, a
discount of approximately 15% to the market price of Redefine linked units at
close of trade on 10 October 2007 (being R8,08), which represents an economic
cost of 1.5% of Redefine`s market capitalisation. Redefine believes that this
cost will be outweighed by the commercial and strategic benefits to be derived
by Redefine from the BEE transaction as well as its related strategies and
transformation objectives in the medium to long term.
The BEE participants will not be entitled to dispose of the BEE units for a
period of 7 years from their issue, save that they will be permitted to dispose
of only as many of their units as is necessary to enable them to settle payment
of the profit share owing to RMB Securities (Proprietary) Limited ("RMB") and
Redefine, further detailed in paragraphs 4 and 5 below.
The BEE participants will be entitled to all voting rights attaching to the BEE
units from the date on which the units are issued to them.
The acquisition of Redefine linked units by the BEE participants will entail
issues of units for cash requiring Redefine unitholder approval.
3. THE BEE PARTICIPANTS
The BEE participants and details of their participation are set out in the table
and paragraphs below:
Name of BEE participant % of BEE % of units in Approx
allocation issue after BEE Value
transaction (based on
issue
price)
R`m
Strategic
Ngatana Property 25 2.22* 137 000 000
Investments
Mtshobela Capital Holdings 10 0.89 54 800 000
Vunani Capital 10 0.89 54 800 000
Clearwater Capital 10 0.89 54 800 000
Loato Properties 5 0.44 27 400 000
Broad-based
Phuthanang Youth Trust 10 0.89 54 800 000
African Lotus Education 10 0.89 54 800 000
and Development Trust
MaAfrika Tikkun 10 0.89 54 800 000
Basadi Bapono 10 0.89 54 800 000
Total 100 8.89 548 000 000
* Excludes units held prior to the BEE transaction
Strategic BEE investors
Ngatana Property Investments
Ngatana which will acquire 25% of the BEE allocation, is a broadbased
empowerment group with a focus on property. Ngatana is headed by Lance Manala,
who also has interests in the information and communication technology and
shipping industries, through his company Amistad. Lance is chairman of the
South African Maritime Safety Authority (SAMSA) and was formerly chairman of
Prescient Investment Management. Other participants in Ngatana include the
family of Dines Gihwala, current chairman of Redefine and chairman of Hofmeyr
Attorneys, Inkari Basadi, a black women`s investment group, Sakhikamva, an NGO
investment group, Prescient Foundation and a group of black professionals.
Ngatana currently holds a 4.15% interest in Redefine.
Mtshobela Capital Holdings
Abu Varachhia, who is a director and shareholder of Mtshobela Capital Holdings,
is also the managing director of Letchmiah, Daya & Varachhia, one of the largest
quantity surveying firms in South Africa, and one of the few professional firms
in the SA construction industry to be black-owned. Mtshobela Capital Holdings
has been allocated 10% of the BEE allotment.
Vunani Group
Vunani Group which, pursuant to the BEE transaction, will (via a whollyowned
subsidiary) acquire 10% of the BEE units was established through management
buyout of African Harvest Capital in 2004 and forms part of the Vunani Capital
Holdings group, led by Ethan Dube, which is a blackowned and managed financial
services group established in 1998. Vunani is active in the property sector, BEE
structuring, corporate advisory services, private equity, capital raising and
stockbroking.
Clearwater Capital
Clearwater Capital, owned by the KwaZulu-Natal based Mehta family, which will
take up 10% of the BEE allocation, is an investment company with strong
interests in the property sector.
Loato Properties
Loato Properties, an investment company owned and managed by Monica Kebareng
Khumalo and Oarona Khama has been allocated 5% of the BEE units. Monica Khumalo
is a nonexecutive director of Madison and has over 13 years of experience in
property asset management, development and property management. She is a council
member of SAPOA (2004 to present) and is currently a member of the South African
Council for Shopping Centres.
The broad-based empowerment investors
Each of the broad-based empowerment investors will receive an allocation of 10%
of the BEE units, resulting in them holding in aggregate more than 3.5% of the
units in issue after the transaction (which exceeds the requirement for broad-
based ownership in terms of the DTI Codes and the Property Charter).
Phuthanang Youth Trust
- Phuthanang is a nonprofit making youth organisation founded and
headquartered in Soweto. The objective of Phuthanang is to prepare and
introduce outofschool and unemployed youth to professionalism and
entrepreneurship. Phuthanang has a growing membership of 227 members (of
which 53% are young women) and has attracted, to date, a complement of 28
patrons with backgrounds in business and financial services, medicine and
health care, law, education, sports and the public sector. Phuthanang`s
initiatives include tourism (involving tours by tour guides whose training
has been sponsored by Phuthanang), business processing and outsourcing
(involving the first call centre in Soweto which Phuthanang is presently
finalising), youth outreach programs (which are geared towards stimulating
entrepreneurship and providing information about funding and business
related issues), career development and mentorship (involving consultations
in relation to CV writing, job hunting, interviewing skills and workplace
preparation), HIV / AIDS (involving support groups focussing on victims and
families that are affected by HIV / AIDS and providing workshops on HIV /
AIDS prevention and treatment), life skills (involving workshops focussing
on time management, personal wellbeing and grooming), community policing
forum (involving patrolling streets and providing visible security during
community functions as and when the need arises), cleanup campaigns and car
washers.
- The trustees of Phuthanang are Ruth "Mama Ruth" Manala, Modise Motloba and
Makatu Mphore.
The African Lotus Education and Development Trust
This broadbased BEE trust has been established for the benefit of students
from previously disadvantaged communities studying in the fields of
mathematics and science principally at the Universities of the Free State
and the Western Cape. The initial trustees of the trust are Mr Mallet
Pumelele Giyose, Dr Elias Links, Mr Abdurazak Osman and Ms Anita Gihwala.
The sole object of the trust is to provide financial assistance to the
beneficiaries in the form of bursaries, grants or any other form of
gratuitous payment, with the aim of developing previously disadvantaged
individuals in the fields of mathematics and science.
MaAfrika Tikkun
MaAfrica Tikkun ("MaT") is a nongovernmental organisation established in
1994 by the late Chief Rabbi Cyril Harris and Dr Bertie Lubner originally
as a Jewish community initiative designed to assist and support the
upliftment and transformation of disadvantaged communities. Nelson Mandela
is the organisation`s PatronInChief. The organisation has grown since 1994
into a multidenominational multicultural integrated organisation that works
together with local community structures to ensure that it is ultimately
the communities themselves who have ownership and control of the programmes
initiated and driven by MaT. The organisation`s core focus areas are adult
HIV caring and skills development targeting the youth. MaT currently
conducts activities in Gauteng (in Orange Farm, Alexandra and Diepsloot)
and in the Western Cape (in Mfuleni, Delft and Khayelitsha). The
organisation currently has over 10 000 previously disadvantaged
beneficiaries (comprising caregivers, HIV aids patients, orphans and other
vulnerable children, youths and community volunteers). The organisation is
focussed on a holistic care and skills development model that caters for
early childhood development all the way through to youth support and young
adult development. The organisation enjoys partnerships with various
government departments and international donor organisations.
Basadi Bapono
Basadi Bapono is an organisation 100% of the ownership of which vests in
women and a broadbased community organisation, De Laan Investments
(representing The Proudly Mannenberg campaign), a campaign targeting the
working class community of Mannenberg, established in the 1960`s under the
Apartheid Group Areas Act, with a view to reducing levels of unemployment
and crime.
4. FUNDING OF BEE INVESTORS
The strategic BEE investors
The strategic BEE investors will be required to inject equity in an amount of 35
cents per BEE unit, equivalent to approximately 5% of the total capital
required, with the balance being raised from third party funders, RMB (which
will fund R5,80 per BEE unit) and The Standard Bank of South Africa Limited
("SBSA"), which will fund 70 cents per BEE unit.
The broadbased empowerment investors
The broadbased empowerment investors will not be required to procure any of
their own funding. RMB will fund R5,80 per BEE unit, while SBSA will fund the
balance.
Terms of the RMB funding
- The period of the RMB funding will be 5 years, with the entire capital
amount of R464 million being repayable at the end of the period.
- the RMB funding will not attract interest but the right to receipt of any
distributions payable on the BEE units over the 5 year funding term will be
ceded to RMB.
- RMB will at the end of the 5 year funding term be entitled to be paid a
profit share by the BEE participants equivalent to 23,33% of the growth in
value of the BEE units over the period after taking into account the SBSA
funding costs.
Terms of the SBSA funding
The period of the SBSA funding will be 5 years, with the entire capital amount
of R67,2 million, together with all accrued interest (at Redefine`s borrowing
rate) being repayable at the end of the period.
The Standard Bank funding will include recourse to Redefine in the form of a
limited suretyship.
5. PROFIT SHARE PAYABLE TO REDEFINE
To compensate for the discount to market value at which the BEE units are being
issued and in return for Redefine guaranteeing the servicing and repayment of
the SBSA funding, the BEE participants will be obliged to pay Redefine, at the
end of the five year funding period, a profit share equivalent to 10% of the
growth in value of the BEE units over the period (after taking into account
funding costs on R1,05 per unit (at the rate at which SBSA advances funding to
the BEE investors)).
6. CONDITIONS PRECEDENT
The BEE transaction is subject to the following conditions precedent:
- the approval of the specific issue of linked units for cash by ordinary
resolution of 75% of Redefine shareholders and debenture holders present or
represented at general meetings convened for such purpose; and
- the requisite regulatory approvals.
7. PRO FORMA FINANCIAL EFFECTS
The unaudited pro forma financial effects of the BEE transaction (for which the
board of Redefine is responsible) based on the published unaudited interim
results of Redefine for the 6 month period ended 28 February 2007 are set out
below. The financial effects are presented for illustrative purposes only and
may not give a fair reflection of the financial position and results of
operations after the implementation of the BEE transaction.
Before the After the % change
BEE BEE
transaction transaction
(cents) (cents)
Historical earnings per 97.87 78.25 (20.04)
units (EPU)
Historical headline 23.72 11.92 (49.72)
earnings per unit(HEPU)
Distributable earnings per 23.89 24.88 4.16
unit
Net asset value per unit 641.44 645.26 0.60
(NAV)
Net tangible asset value 641.44 645.26 0.60
per unit (NTAV)
Number of units in issue 813,161 893,161 9.84
(`000)
Weighted average number of 678,101 758,101 11.80
units in issue (`000)
Notes:
1. The EPU, HEPU, distributable earnings per unit, NAV and NTAV per unit after
the BEE transaction are based on the assumption that the BEE transaction
took place with effect from 1 September 2006 for purposes of calculation of
the income statement and with effect from and on 28 February 2007 for
purposes of calculation of the balance sheet effect.
2. The EPU and HEPU after the BEE transaction are based on:
- earnings, headline earnings and distributable earnings for the 6
months ended 28 February 2007, adjusted for transaction costs;
- the weighted average number of Redefine units (of 678 million) in
issue for the 6 month period ended 28 February 2007;
3. The NAV and NTAV per unit after the BEE transaction are based on 813
million units in issue as at 28 February 2007.
4. It is assumed that the capital raised pursuant to the issue, amounting to
R547,251,192 after the expenses of the transaction, has been used to reduce
Redefine`s borrowings at an interest rate of 10.23% over the 6 month
period.
5. The aggregate discount of R98,4 million (based on the closing market price
of R8,08 on 10 October 2007) has been taken to the income statement in
terms of IFRS 2.
8. SALIENT DATES AND TIMES, FURTHER DOCUMENTATION AND IMPLEMENTATION
A further announcement containing salient dates and times will be published and
a circular containing details of the BEE transaction and convening meetings of
shareholders and debenture holders will be posted to Redefine unitholders in due
course.
Rosebank
11 October 2007
Corporate advisor, legal advisor and sponsor
Java Capital (Proprietary) Limited
Date: 11/10/2007 15:17:36 Produced by the JSE SENS Department.
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