| Thu 28 Mar 2013, 19:11 | | SYCOM PROPERTY FUND - SYC - Various Corporate Acti |
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SYC 201303280118A
SYC - Various Corporate Actions and Renewal of Cautionary
SYCOM PROPERTY FUND
("Sycom" or the "Fund")
A Collective Investment Scheme in Property ("CISP") registered in terms of the Collective Investment
Schemes Control Act, No. 45 of 2002 ("CISCA") and managed by Sycom Property Fund Managers
Limited ("SPFM") (Registration number 1986/002756/06)
JSE share code: SYC
ISIN: ZAE000019303
Announcement in relation to (i) the acquisition of the remaining 50% of the Somerset Mall
Shopping Centre from AECI Pension Fund; (ii) the conclusion of an agreement with Hyprop
Investments Limited ("Hyprop") in respect of various matters, including the disposal of the
Somerset Mall Shopping Centre, a specific repurchase of Sycom participatory interests
("Sycom Units") and the suspension of litigation proceedings; (iii) rights offer declaration in
respect of a fully underwritten renounceable rights offer; (iv) voluntary trading update; and (v)
renewal of cautionary
1. INTRODUCTION
Sycom unitholders ("Unitholders") are referred to the cautionary announcement published by Sycom
on 25 March 2013 and are advised that:
1.1. SPFM has received an offer from AECI Pension Fund ("APF" and the "APF Offer") to acquire
the remaining 50% undivided share in the property enterprise known as the Somerset Mall
Shopping Centre, Western Cape ("Somerset Mall") not already owned by Sycom (the "APF
Portion") for a cash consideration of R1,15 billion which offer upon acceptance will be subject
to fulfilment of conditions precedent usual for a transaction of this nature. Sycom intends
accepting the APF Offer and is in the process of obtaining the approval of FirstRand Bank
Limited, the Sycom Trustee ("the Trustee") to this. Further details of the APF Offer and the
resultant acquisition are set out in paragraph 3 below (the "APF Acquisition"). In terms of the
aggregation rules of the JSE Limited ("JSE") Listings Requirements, the APF Acquisition is a
Category 1 transaction and is therefore conditional upon Unitholders' approval. A Category 1
circular will be distributed to Unitholders as referred to below.
1.2. SPFM has concluded an agreement with Hyprop (full details of which are set out in
paragraph 4 below) on 28 March 2013 (the "Hyprop Transaction" and "Hyprop Transaction
Signature Date"), in terms of which, inter alia:
a. Hyprop will acquire from Sycom, subject to fulfilment of conditions precedent usual for
a transaction of this nature, the Somerset Mall, comprising:
i. the APF Portion; and
ii. the remaining 50% undivided share in Somerset Mall currently owned by
Sycom (the "Sycom Portion"),
as a composite acquisition for a total consideration of R2,3billion.
b. Hyprop will settle the entire consideration by the delivery and transfer to SPFM (on
behalf of Sycom) of 81,500,000 Sycom Units (comprising approximately 32.8% of the
total Sycom Units in issue and 97% of Hyprop's holding in Sycom) currently owned by
Hyprop (the "Consideration Units"), whereafter the Consideration Units will be
cancelled and their listing terminated. The effective price of each Consideration Unit
is 2822 cents per Consideration Unit, equivalent to the 30 business day volume-
weighted average traded price of Sycom Units (the "30 Day VWAP Price") after close
of trade on the JSE on Wednesday, 27 March 2013;
c. Hyprop has granted Sycom a right of first refusal over a four-year period to acquire
the property enterprise known as the Atterbury Value Mart, Faerie Glen, Pretoria
East;
d. Hyprop has agreed to suspend the litigation proceedings instituted against the Trustee
(past and present) of Sycom, SPFM and the JSE in the South Gauteng High Court
Johannesburg, regarding certain disputed general issues of Sycom Units for cash
and has agreed to withdraw the litigation proceedings on implementation of the
Hyprop Transaction and the transfer of the Somerset Mall to it; and
e. Hyprop has agreed to vote in favour of a ballot of Unitholders (the "Ballot") (the
relevant documentation to be circulated to all Unitholders as soon as practicable after
the Registrar of Collective Investment Schemes ("the Registrar") and the Trustee
have approved the requisite Ballot Circular to Unitholders) to increase Sycom's
gearing limit to 60% of enterprise value, subject to certain restrictions whilst Hyprop is
a material Unitholder, as more fully described below.
Given that Hyprop is a material Unitholder in Sycom, the Hyprop Transaction is regarded as a
large related party transaction in terms of the JSE Listings Requirements and as such is
conditional upon the approval of a simple majority of Unitholders being obtained therefor
(other than Hyprop and its associates', if any, and any other Unitholder excluded from voting
or the votes of which are not permitted to be counted, pursuant to the JSE Listings
Requirements).
In addition, since the consideration is to be settled by the delivery by Hyprop to Sycom of the
Consideration Units (the "Buy-Back"), the JSE Listings Requirements pertaining to a specific
repurchase of securities will be applicable to the settlement of the Hyprop Consideration. As
such, the Buy-Back will require the approval of Unitholders by way of special resolution (as
contemplated in the Trust Deed) (excluding the votes of Hyprop and its associates, if any,
given its participation in the repurchase and any Unitholder excluded from voting in respect of
such resolution in terms of the JSE Listings Requirements) (the "Buy-Back Resolution").
Subject to the JSE approving its appointment, QuestCo (Pty) Ltd (the "Independent Expert") is
to be appointed by SPFM to provide a fairness opinion and advise the board of directors of
SPFM (the "board") on whether the terms of the Hyprop Transaction are fair insofar as
Unitholders are concerned.
1.3. Unitholders are further advised that Sycom intends to raise R900 000 002 by way of a fully
underwritten renounceable rights offer (the "Rights Offer") of 33027 523 new Sycom Units
(the "Rights Offer Units") to qualifying Unitholders at a subscription price of 2725 cents (the
"Rights Offer Price") per Rights Offer Unit, at a ratio of entitlement of 13.28519 Rights Offer
Units for every 100 Sycom Units held on the Rights Offer record date, being Friday, 26 April
2013 ("Record Date"). Further details of the Rights Offer are set out in paragraph 5 below.
2. RATIONALE FOR THE APF ACQUISITION, THE HYPROP TRANSACTION AND THE RIGHTS
OFFER
The board believes that facilitating the exit of Hyprop from Sycom in an orderly fashion brings a
number of benefits to Unitholders, including inter alia:
- the removal of potential limitations and restrictions in Sycom's ability to operate in terms of the
board's stated strategy;
- the removal of visible overhang arising from Hyprop's stated non-core' holding;
- an increase in the institutional free float in Sycom; and
- the removal of ongoing litigation, with its attendant costs and distraction of management.
The exit of Hyprop from the Sycom Unitholder register and the more flexible gearing limits in Sycom
will permit the board to focus its energies on pursuance of its stated objectives, which are to provide
consistent real growth in distributions per Sycom Unit to Unitholders and to maximise the total return
on investment for Unitholders on a sustainable basis.
However, on a "stand-alone" basis, even if the disposal of the Somerset Mall to Hyprop, pursuant to
the Hyprop Transaction, were not to be implemented for any reason, and Sycom simply acquires the
APF Portion in terms of the APF Acquisition, the acquisition of the APF Portion is in line with Sycom's
strategy to acquire further interests in existing co-owned assets within its portfolio. Sycom's long-
standing involvement in the management of Somerset Mall and detailed understanding of the asset
minimises the transaction risk inherent in the APF Acquisition. The purchase price of R1.15 billion
equates to a capital value of 34682 cents] per square metre, and a first year valuation yield of 6.5%
as at 1 April 2013, in line with recent comparable market transactions. The valuation yield at the
Effective Date is expected to be in the order of 6.7%.
The Rights Offer is required to place Sycom in sufficient funds to execute the APF Acquisition, which
is to be implemented prior to the disposal of the Somerset Mall to HypropThe underwritten nature of
the Rights Offer provides certainty of funding for the proposed APF Acquisition. The Ballot is
necessary to raise the gearing limit in anticipation of the Hyprop Transaction, which when
implemented will result in Sycom's gearing increasing to 33%. This is higher than its current limitation
of 30%.
3. TERMS OF THE APF ACQUISITION
In terms of the APF Agreement, Sycom will acquire the APF Portion from APF, with effect from the
date of transfer of the APF Portion to it, for a cash consideration of R1,15 billion. The consideration
will be funded using the proceeds of the Rights Offer and Sycom's loanfacilities in compliance with the
gearing limitations prescribed in the Trust Deed.
The APF Acquisition is subject to fulfilment (or waiver, where appropriate) of the following conditions
precedent:
- SFPM satisfying itself as to the results of a due diligence investigation on the APF Portion,
within 30 days from the date of exercise of the APF Offer ("APF Acquisition Date of
Signature");
- the relevant regulatory approvals, including, to the extent necessary, the Registrar and the
Competition Authorities, within 70 business days from the APF Acquisition Date of Signature,
although the Competition Authorities can extend this date, in their discretion; and
- the approval of Unitholders, by the later of 70 business days after the APF Acquisition Date of
Signature and all regulatory approvals have been obtained.
4. TERMS OF THE HYPROP TRANSACTION
The disposal
After taking transfer of the APF Portion from APF, Sycom is disposing of the Somerset Mall to Hyprop for a
consideration of R2,3 billion (the "Hyprop Consideration") with an effective date of the later of
1 October 2013 or the first day of the calendar month immediately following fulfilment of the conditions
precedent (the "Effective Date").
Settlement of the Hyprop consideration
The Hyprop consideration for the Somerset Mall is to be settled by the delivery and transfer by
Hyprop to Sycom of 81,500,000 Sycom Units. Both in terms of CISCA and the JSE Listings
Requirements, this is regarded as a repurchase and as such is subject to the provisions of the JSE
Listings Requirements applicable to a specific repurchase.
The Consideration Units are being transferred to Sycom at an effective price of 2822 cents per
Sycom Unit which is equal to the 30 Day VWAP Price for the 30 business day period ended after
close of trade on the day immediately preceding publication of this announcement on SENS,
Wednesday, 27 March 2013, of 2821.546 cents.
Hyprop will be entitled to receipt of the normal Sycom distribution on the Consideration Units up until
the Sycom distribution period ending 30 September 2013. If transfer does not occur on 1 October, in
respect of the period between 1 October 2013 and the Effective Date, an amount will be payable to Hyprop
in compensation for giving up the applicable distribution, of R13 million per month until the Effective Date.
Sycom will be entitled to all income derived from the Somerset Mall until the Effective Date (excluding
any income from the APF Portion prior to transfer thereof to Sycom).
Conditions precedent to the Hyprop Transaction
The Hyprop Transaction is subject to, inter alia, the fulfilment or waiver, where appropriate, of the
following conditions precedent, which must all be fulfilled or waived by no later than 31 March 2014:
- the Trustee approving and ratifying the Hyprop Transaction, by not later than 20 (twenty)
business days from the Hyprop Transaction Signature Date and granting any other
approvals required for implementation of the Hyprop Transaction, by 30 August 2013;
- Hyprop completing a due diligence investigation to its satisfaction on the Somerset Mall
by the later of 30 (thirty) business days after the Hy
