| Mon 29 Aug 2016, 10:37 | | SYNERGY INCOME FUND LIMITED - Synergy/Vukile/Arrow |
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SYNERGY INCOME FUND LIMITED - Synergy/Vukile/Arrow 29 Aug 2016
SGB SGA VKE AWA 201608290007A
Synergy/Vukile/Arrowhead - Repositioning of Synergy by way of a transaction between Synergy, Vukile, Arrowhead
SYNERGY INCOME FUND LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 2007/032604/06)
JSE share code: SGA ISIN: ZAE000202883
JSE share code: SGB ISIN: ZAE000202891
(Approved as a REIT by the JSE)
(“Synergy”)
VUKILE PROPERTY FUND LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 2002/027194/06)
JSE share code: VKE NSX share code: VKN
ISIN: ZAE000180865
(Approved as a REIT by the JSE)
(“Vukile”)
ARROWHEAD PROPERTIES LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 2011/000308/06)
JSE share code: AWA ISIN: ZAE000203105
(Approved as a REIT by the JSE)
(“Arrowhead”)
JOINT ANNOUNCEMENT REGARDING THE REPOSITIONING OF SYNERGY AS A HIGH YIELDING, HIGH GROWTH FUND BY WAY OF A TRANSACTION BETWEEN SYNERGY, VUKILE AND
ARROWHEAD AND WITHDRAWAL OF SYNERGY CAUTIONARY ANNOUNCEMENT
1. INTRODUCTION AND BACKGROUND
1.1. Shareholders are referred to the SENS announcement released jointly by Synergy, Vukile and Arrowhead
on 10 March 2016, in terms of which they were advised that the parties were in advanced discussions
regarding a potential transaction. Synergy shareholders are further referred to previous Synergy cautionary
announcements, the last of which was released on SENS on 22 July 2016, in terms of which they were
advised to exercise caution when dealing in their Synergy shares until a further announcement on the
proposed transaction with Vukile and Arrowhead was made.
1.2. Synergy, Vukile and Arrowhead are now pleased to announce the conclusion of the following agreements,
all of which are inter-conditional and which will, once implemented, effectively reposition Synergy as a
specialist high yielding, high growth fund with an internally managed portfolio comprising retail, office
and industrial assets (“the transaction”):
1.2.1. a sale of shares and claims agreement between Vukile, Synergy, Vukile Asset Management
Proprietary Limited (“VAM”) and Arrowhead (the “VAM internalisation agreement”);
1.2.2. an exchange agreement between Vukile and Synergy (the “asset exchange agreement”);
1.2.3. a sale of shares and claims agreement between Arrowhead, Vividend Income Fund Limited
(“Vividend”), Mark Kaplan, Gerald Leissner, Imraan Suleman, Synergy and Cumulative
Properties Limited (“Cumulative”) (the “Cumulative acquisition agreement”); and
1.2.4. a cost sharing agreement between Synergy, Vukile and Arrowhead,
(together, the “transaction agreements”).
2. RATIONALE FOR THE TRANSACTION
2.1. Rationale for Synergy
2.1.1. Synergy has been operating as a specialist retail property fund with a specific focus on
medium-sized community and small regional shopping centres in high-growth nodes, serving
South Africa’s high-growth, lower-LSM retail sector, but illiquidity in its shares has
hamstrung its growth. As a small capitalisation fund with limited capacity to aggressively
acquire assets and grow the company to a meaningful size, Synergy’s prospects for future
growth remain constrained.
2.1.2. The transaction will reposition Synergy as a high yielding, high growth income-focused
property fund internally managed by an executive team with proven credentials and
experience relevant to its new investment strategy. The board of directors of Synergy is of the
view that the revised strategy will best utilise Synergy’s dual share capital structure, which
remains a valuable differentiator in the listed property sector. A high yielding, high growth
fund with a dual-class share capital structure will present an exciting proposition for income
focused property investors and it is expected to promote interest in and tradability of both the
Synergy A and B ordinary shares.
2.1.3. From a Synergy A shareholder’s perspective, the transaction will result in a significantly
higher cash cover ratio and entrenched longevity, as well as a potential to enhance the
liquidity of A ordinary shares over time. From a Synergy B shareholder’s perspective, the
transaction will be yield enhancing and is expected to deliver sector-beating growth in
distributions through a targeted acquisition strategy. Synergy’s recently adopted hedging
policy, requiring 75% of interest-bearing debt to be hedged, will also mean less interest rate
risk.
2.1.4. Ultimately, the transaction will increase Synergy’s market capitalisation to approximately
R3.3 billion, with a property portfolio valued at circa R4.3 billion. Importantly, the
transaction will re-energise Synergy and differentiate it within the listed property sector, with
the company seeking to make only yield-enhancing acquisitions that grow sustainable
earnings, thereby providing a platform for growth going forward. The transaction will also
see Synergy optimising the earnings accretive nature of its dual-class share capital structure.
2.2. Rationale for Vukile
2.2.1. From a Vukile perspective, the acquisition of the Synergy portfolio will significantly advance
Vukile’s strategy of transitioning to a specialist retail fund.
2.2.2. With Synergy’s dual-class share capital structure under the stewardship of a highly
experienced management team with credentials in managing and unlocking value in high
yielding, high growth assets, the transaction is anticipated to unlock value for Vukile.
2.2.3. The transaction is earnings accretive for Vukile from the outset.
2.3. Rationale for Arrowhead
2.3.1. As most recently announced in its annual report for the year ended 30 September 2015,
Arrowhead has for some time intended to transfer its high yielding properties into a separate
subsidiary to be listed on the JSE, with its own dedicated management team focused on
growing the portfolio on an accretive basis. The transaction sees Synergy become the vehicle
for the implementation of this strategy.
2.3.2. By transferring a number of its smaller high yielding assets into Synergy, Arrowhead will
effectively create a separately listed high growth fund, benefitting from Synergy’s strategic
dual-class A and B share capital structure. Arrowhead considers there to be significant
opportunities for growth, particularly in respect of properties valued from R20 million to
R75 million, a niche space currently largely ignored by most listed property funds, and
believes that its dedicated and experienced internal management team can add significant
value to Synergy in this regard.
2.3.3. Synergy’s new board and management team will leverage off Arrowhead’s expertise and
experience in actively managing portfolios that are designed for strong growth and higher
yields.
3. MECHANICS OF THE TRANSACTION
3.1. The transaction, once implemented, will result in (i) a reverse take-over of Synergy by Arrowhead, with
Synergy’s property portfolio reconstituted to comprise high yielding assets across the retail, office and
industrial sectors, to be managed internally with strategic and managerial oversight by Arrowhead, and (ii)
Vukile becoming a specialist retail fund. More specifically, the transaction will be implemented as follows:
3.1.1. the asset and property management function of Synergy will be internalised through the
acquisition of 100% of the issued share capital of VAM, in consideration for which Synergy
will issue a number of Synergy B ordinary shares to Vukile, with the property management
function subsequently outsourced to JHI Properties Proprietary Limited (“JHI”);
3.1.2. Synergy will exchange its entire portfolio of 14 retail properties for a portfolio of 29 high
yielding retail, office and industrial properties currently owned by Vukile;
3.1.3. Synergy will fix the interest rate on a number of its debt facilities, such that 75% of its total
borrowings is hedged;
3.1.4. Synergy will acquire 100% of the issued share capital of Cumulative, a subsidiary of
Arrowhead that will own 100 high yielding retail, office and industrial properties, in
consideration for the issue of a number of Synergy B ordinary shares to the shareholders of
Cumulative;
3.1.5. the memorandum of incorporation of Synergy (the “Synergy MoI”) will be amended, to inter
alia ensure that any conversion of Synergy A ordinary shares to Synergy B ordinary shares,
or vice versa, or any redemption of any class of shares in whole or in part, is subject to
approval by the holders of both Synergy A ordinary shares and Synergy B ordinary shares by
way of a separate special resolution taken at a separate general meeting of each class of
shareholder;
3.1.6. the name of Synergy will be changed to “Gemgrow Properties Limited”; and
3.1.7. the board of directors of Synergy will be reconstituted,
all of which are inter-conditional and form part of the composite transaction, as more fully described
below. Following the implementation of the transaction, Arrowhead will hold 61.74% of Synergy B shares
(and 55.22% of Synergy’s total issued share capital) and Vukile will hold 29.49% of Synergy B shares
(and 26.38% of Synergy’s total issued share capital).
3.2. Internalisation of VAM
3.2.1. In terms of the VAM internalisation agreement, Synergy will acquire 100% of the issued
share capital of VAM from Vukile, in consideration for which Synergy will issue 22 945 522
Synergy B ordinary shares (the “VAM consideration shares”) to Vukile (the “VAM
internalisation”). Unless Arrowhead agrees otherwise, Vukile is required to retain the VAM
consideration shares until 30 September 2017.
3.2.2. The net asset value of VAM was R356 000 as at 31 March 2016. The anticipated
management fees to be earned and retained by VAM for the 12 month period to
30 September 2017 is R15.2 million.
3.2.3. From an economic perspective, the VAM internalisation will take effect from 1 October 2016
(the “effective date”), from which date all risk and all benefit attaching to the shares in VAM
will be deemed to have passed to Synergy. Possession and control of such shares will only be
given to Synergy, and the VAM consideration shares will be issued to Vukile, on the later of
the effective date and the fifth business day following the fulfilment or waiver of the last of
the conditions precedent set out below (the “implementation date”).
3.2.4. The VAM consideration shares will be issued ex entitlement to Synergy’s dividend for the
period ending 30 September 2016. Prior to the implementation date, VAM will declare and
pay to Vukile (as a dividend) an amount equal to VAM’s net profits after tax for the period
up to the effective date.
3.2.5. Pursuant to the implementation of the transaction:
3.2.5.1. Synergy’s asset management function will be undertaken internally;
3.2.5.2. Synergy’s property management function will be outsourced to JHI in terms of
the management agreement entered into between Arrowhead and JHI on or
about 13 September 2011 and amended on 12 December 2014, in terms of
which JHI is appointed as the property manager of all properties owned or
managed by Arrowhead (the “Arrowhead property management agreement”);
and
3.2.5.3. the board of directors of VAM will be reconstituted by directors appointed by
Synergy.
3.2.6. The provisions of the memorandum of incorporation of VAM (the “VAM MoI”) will not
frustrate Synergy in any way from compliance with its obligations in terms of the JSE
Listings Requirements and nothing contained in the VAM MoI will relieve Synergy from
compliance with JSE Listings Requirements.
3.2.7. The VAM internalisation agreement contains warranties standard for a transaction of its
nature.
3.3. The asset exchange
3.3.1. In terms of the asset exchange agreement, Synergy will dispose of its current portfolio of
retail properties, the details of which are set out below (the “Synergy portfolio”) to Vukile,
in exchange for which Vukile will transfer a higher yielding portfolio of retail, office and
industrial assets, the details of which are set out below (the “Vukile portfolio”) to Synergy.
3.3.2. The asset exchange sees Vukile acquiring the Synergy portfolio for R2 450 200 000,
representing a 1% discount to the value of the portfolio as at 31 July 2016. In exchange,
Synergy will acquire the Vukile portfolio (externally valued as at 31 July 2016 at
R2 433 800 000) plus an amount of R18 200 000 in cash, with interest levied for the period
from 1 October 2016 (the effective date) to the date on which the cash is paid by Vukile to
Synergy.
3.3.3. The net profit attributable to the Synergy portfolio for the 12 months to 30 September 2017 is
forecast at R214.2 million. The net profit attributable to the Vukile portfolio for the
12 months to 30 September 2017 is forecast at R233.9 million.
3.3.4. The asset exchange is an exchange of each relevant portfolio as a going concern.
Accordingly, subject to the terms of the Arrowhead property management agreement and
paragraph 3.5 below, Synergy will continue the conduct of the acquired Vukile portfolio as
far as possible in the same manner as it was conducted by Vukile, and will to the fullest
extent possible be substituted for Vukile in respect of each of the relevant leases and other
contracts that may be in place in respect of the Vukile portfolio, and vice versa.
3.3.5. All risk and benefit in respect of the Synergy portfolio will be given to Vukile, and all risk
and benefit in respect of the Vukile portfolio will be given to Synergy, on 1 October 2016
(the effective date), from which date:
3.3.5.1. Vukile or Synergy shall be entitled to any rentals accruing from the relevant
portfolio, as the case may be; and
3.3.5.2. Vukile or Synergy shall be liable for all rates and taxes levied on the relevant
portfolio, as the case may be.
3.3.6. Notwithstanding the effective date, the delivery and transfer of occupation and control of the
Vukile portfolio to Synergy and of occupation and control of the Synergy portfolio to Vukile,
as going concerns, will take place on the implementation date (as defined in paragraph 3.2.3
above). Registration of transfer of the properties forming part of the Synergy and Vukile
portfolios, in the name of Vukile and Synergy, respectively, will occur as soon as reasonably
possible following the implementation date.
3.3.7. The Companies Act 71 of 2008 (the “Companies Act”) affords the entitlement to seek relief
in terms of section 164 to Synergy shareholders in respect of the asset exchange, being a
transaction proposed by a company in terms of section 112 of the Companies Act, provided
that the shareholders take appropriate action as prescribed in section 164 of the Companies
Act. The asset exchange may also only be implemented if the Takeover Regulation Panel
(“TRP”) has issued a compliance certificate in terms of sections 115(1)(b) and 121(b) of the
Companies Act. In addition, and notwithstanding that the special resolution required for the
approval of the asset exchange by Synergy shareholders in terms of section 115(2) of the
Companies Act may have been adopted, Synergy may not proceed to implement the asset
exchange without the approval of the court if:
3.3.7.1. such resolution was opposed by at least 15% of Synergy voting rights that were
exercised on that resolution, and within five business days after the vote, any
person who voted against that special resolution requires Synergy to seek court
approval; or
3.3.7.2. the court, on application within 10 business days after the vote by any person
who voted against such special resolution grants that person leave to apply to a
court for a review of the asset exchange.
3.3.8. The asset exchange agreement contains warranties standard for a transaction of its nature.
3.4. The Cumulative acquisition
3.4.1. In terms of the Cumulative acquisition agreement, Synergy will acquire 100% of the issued
shares in Cumulative, in exchange for the issue to the shareholders of Cumulative as at the
implementation date (as defined in paragraph 3.2.3 above), namely Arrowhead, Vividend,
Mark Kaplan, Gerald Leissner, Imraan Suleman and any other Synergy executives who hold
shares in Cumulative and who are entered as such in the securities register of Cumulative on
or before the implementation date (the “Cumulative shareholders”) (in proportion to their
shareholding in Cumulative as at the implementation date) of 271 412 267 Synergy B
ordinary shares (the “Cumulative consideration shares”). Unless Vukile agrees otherwise,
Arrowhead and Vividend will be required to retain their Cumulative consideration shares
until 30 September 2017.
3.4.2. Cumulative will own a portfolio of 100 high yielding retail, office and industrial properties
across South Africa, externally valued as at 31 July 2016 at R1 893 300 000, the details of
which are set out below (the “Cumulative portfolio”). The net profit attributable to the
Cumulative portfolio for the 12 months to 30 September 2017 is R197.0 million.
3.4.3. Synergy will fix the interest rate on a number of its debt facilities, such that 75% of its total
borrowings is hedged.
3.4.4. From an economic perspective, the Cumulative acquisition will take effect from 1 October
2016 (the effective date), from which date all risk and all benefit attaching to the shares in
Cumulative (including the right to rentals accruing from the Cumulative portfolio) will be
deemed to have passed to Synergy. Possession and control of the shares will be given to
Synergy, and the Cumulative consideration shares will be issued to the Cumulative
shareholders, on the implementation date.
3.4.5. The issue of the Cumulative consideration shares to the Cumulative shareholders in terms of
the Cumulative acquisition agreement will result in Arrowhead being able to exercise at least
35% of the total voting rights attached to securities of Synergy. Accordingly, in terms of:
3.4.5.1. sections 123 of the Companies Act, Arrowhead would, upon the issue of the
Cumulative consideration shares, be obliged to make an offer to the remaining
Synergy B shareholders to acquire their Synergy B ordinary shares at the same
price at which the Cumulative shareholders acquire the Cumulative
consideration shares (being the 5 day clean volume weighted average price of a
Synergy B ordinary share immediately preceding the implementation date); and
3.4.5.2. section 125 of the Companies Act read with Takeover Regulation 87,
Arrowhead would be obliged to make an offer to the remaining Synergy A
shareholders to acquire their Synergy A ordinary shares at a price comparable to
the price at which the Cumulative shareholders acquire the Cumulative
consideration shares (being the 5 day clean volume weighted average price of a
Synergy A ordinary share immediately preceding the implementation date).
3.4.6. The transaction is conditional on the mandatory offer being waived as contemplated in
Takeover Regulation 86(4) and dispensed with by the TRP (the “waiver of mandatory
offer”).
3.4.7. The Cumulative consideration shares will be issued ex entitlement to Synergy’s dividend for
the period ending 30 September 2016. Cumulative will declare and pay to its shareholders as
at the effective date (as a dividend) an amount equal to Cumulative’s net profits after tax for
the period up to the effective date.
3.4.8. The provisions of the Synergy MoI will not frustrate Arrowhead in any way from compliance
with its obligations in terms of the JSE Listings Requirements and nothing contained in the
Synergy MoI will relieve Arrowhead from compliance with JSE Listings Requirements.
Similarly, the provisions of the memorandum of incorporation of Cumulative (the
“Cumulative MoI”) will not frustrate Synergy in any way from compliance with its
obligations in terms of the JSE Listings Requirements and nothing contained in the
Cumulative MoI will relieve Synergy from compliance with the JSE Listings Requirements.
3.4.9. The Cumulative acquisition agreement contains warranties standard for a transaction of this
nature.
3.5. Change of name
With the repositioning of Synergy as a specialist high yielding, high growth fund, the board proposes that
the name of the company be changed from “Synergy Income Fund Limited” to “Gemgrow Properties
Limited”, which change has been approved by the Companies and Intellectual Properties Commission.
Should the transaction be implemented, shareholders will have their account held at their CSDP or broker
updated to reflect the change of name.
3.6. Reconstitution of the Synergy board of directors
3.6.1. The board of directors of Synergy will be reconstituted on and with effect from the
implementation date, with the current board of directors resigning.
3.6.2. Subject to the approval of shareholders at the general meeting to be convened as detailed in
paragraph 5.3 below, a new chief executive officer and four non-executive directors will be
appointed to the board with effect from the implementation date. A new chief operating
officer and chief financial officer have been identified, to be appointed with effect from the
implementation date. Their appointment as such will be subject to confirmation by
shareholders at Synergy’s first annual general meeting to be held following the
implementation date.
3.7. Change of year end
Prior to 30 September 2016, Synergy will file a notice of a change in the financial year of Synergy to
30 September, in terms of section 27(4) of the Companies Act. This change is required in order to align
with the financial year of Synergy with that of Arrowhead post implementation of the transaction.
3.8. MoI amendment
3.8.1. Pursuant to the implementation of the transaction, the Synergy MoI will be amended as
follows:
3.8.1.1. to ensure that any conversion of Synergy A ordinary shares to Synergy B
ordinary shares, or vice versa, or any redemption of any class of shares in whole
or in part, is subject to approval by the holders of both Synergy A ordinary
shares and Synergy B ordinary shares by way of a separate special resolution
taken at a separate general meeting of each class of shareholder;
3.8.1.2. to reflect the change of name, as set out above;
3.8.1.3. to reflect the change in year end of Synergy to 30 September 2016; and
3.8.1.4. to provide for the payment of quarterly distributions to Synergy A and B
ordinary shareholders on the same terms as half-yearly distributions are
determined in terms of the current Synergy MoI, so as to align the company’s
distribution policy with that of Arrowhead.
3.8.2. Save as set out above, the Synergy MoI will remain unchanged. In particular, the rights of
Synergy A ordinary shareholders to distributions on their Synergy A ordinary shares will not
be diminished or adversely affected.
3.9. Ancillary matters
3.9.1. Arrangements have been agreed to between Vukile on the one hand and Arrowhead and
Vividend on the other hand in terms of which if the actual income generated by the Vukile
portfolio and/or the Cumulative portfolio materially differs from the forecasted income, they
will amongst themselves adjust their relative holdings of Synergy B consideration shares.
3.9.2. Arrowhead and Vukile will continue to manage the Cumulative portfolio and Vukile
portfolio, respectively, for the duration of the period from 1 October 2016 to 30 September
2017. Whereas the Cumulative portfolio will (as part of the enlarged Synergy portfolio)
effectively continue to be managed in terms of the Arrowhead property management
agreement following implementation date, the Vukile portfolio will, notwithstanding the
provisions of the VAM internalisation agreement, be managed by Vukile (or its appointed
property manager) for the duration of the period from 1 October 2016 to 30 September 2017
on the same basis as such properties were managed prior to the implementation date.
However, asset management functions relating to capital expenditure exceeding the forecast
budget in respect of the Vukile portfolio by more than R1 000 000, as well as property sales
in respect of the Vukile portfolio, will be evaluated and approved by Synergy pursuant to the
internalisation of Synergy’s asset management function.
4. CONDITIONS PRECEDENT
The implementation of the transaction remains subject to the fulfilment of the following conditions precedent:
4.1. the transaction agreements becoming unconditional and of full force and effect in accordance with their
terms;
4.2. shareholders of Synergy approving all resolutions required whether in terms of the Companies Act and/or
the JSE Listings Requirements, to approve and ratify the conclusion and implementation of the transaction,
including the amendment of the Synergy MoI;
4.3. the mortgagees under the current mortgage bonds registered over the properties within the Vukile and
Synergy portfolios consenting to the asset exchange or cancellation or substitution of such mortgage bonds
as may be appropriate in the circumstances;
4.4. the mortgagees under the current mortgage bonds registered over the properties within the Cumulative
portfolio consenting to the cancellation of such mortgage bonds as may be appropriate in the
circumstances;
4.5. the lenders who are secured by any properties within the Synergy portfolio approving, to the extent
necessary, the change of control of Synergy pursuant to the transaction;
4.6. the TRP exempting Arrowhead from the mandatory offer on the basis of waiver of mandatory offer;
4.7. the TRP issuing a compliance certificate in respect of the asset exchange; and
4.8. all applicable regulatory and statutory approvals for the implementation of the transaction being obtained
from the Competition Authorities, the TRP and the JSE (including JSE approval of the continued listing of
Synergy following the transaction).
5. CATEGORISATION OF THE TRANSACTION FOR SYNERGY, RELATED PARTY AND TRP
CONSIDERATIONS AND FURTHER DOCUMENTATION
5.1. From a Synergy perspective, the transaction:
5.1.1. constitutes a category 2 acquisition, category 1 acquisition and disposal and a reverse take-
over of Synergy by Arrowhead, in terms of the JSE Listings Requirements;
5.1.2. constitutes the disposal of all or the greater part of Synergy’s assets, as contemplated in
section 112 of the Companies Act, the issue of shares with a combined voting power that will
exceed 30% of the voting power of all Synergy B shares in issue, as contemplated in
section 41(3) of the Companies Act, and the issue of shares by Synergy to a related or inter-
related person, as contemplated in section 41(1)(b) (read with section 2) of the Companies
Act; and
5.1.3. requires a waiver of mandatory offer in terms of Takeover Regulation 86(4).
5.2. As Vukile is a material shareholder of Synergy, the transaction is, from a Synergy perspective, also being
treated as a related party transaction under the JSE Listings Requirements.
5.3. A circular to Synergy shareholders (the “Synergy circular”), incorporating a notice of general meeting of
Synergy shareholders to be convened for the purpose of considering and, if deemed fit, passing the
resolutions required to approve and implement the transaction (the “general meeting”), together with
revised listing particulars for Synergy, will be issued in due course. Whereas Vukile owns approximately
65.02% of Synergy’s total issued share capital, and in accordance with the provisions of the JSE Listings
Requirements and Companies Act, while the voting rights controlled by Vukile and its associates may be
taken into account in determining the requisite quorum, such voting rights may not be taken into account in
determining the outcome of certain resolutions to be proposed at the general meeting.
5.4. As required in terms of the JSE Listings Requirements and the Takeover Regulations, a sub-committee of
the board comprising only the independent non-executive directors of Synergy, was constituted to appraise
the transaction on behalf of the Synergy board of directors (the “Synergy independent board”) which has
appointed PSG Capital Proprietary Limited (the “independent expert”) to compile a report on the terms
and conditions of the transaction and opine as follows:
5.4.1. as to the fairness of the VAM internalisation and asset exchange, in terms of section 10.4(f)
of the Listings Requirements;
5.4.2. as to the fair and reasonableness in respect of the asset exchange as a disposal in terms of
section 112 of the Companies Act, in terms of Regulation 90 of the Takeover Regulations;
and
5.4.3. as to the fair and reasonableness of the waiver of mandatory offer, in terms of
Regulation 86(4) of the Takeover Regulations,
(together, the “independent expert opinion”).
5.5. The independent expert has concluded that the transaction is fair and reasonable to Synergy A and B
shareholders, which opinion will be contained in the Synergy circular. The Synergy independent board,
having been so advised by the independent expert and after due consideration of the independent expert
opinion, confirms that the transaction is fair and reasonable insofar as Synergy shareholders are concerned
and accordingly will recommend that Synergy shareholders vote in favour of the resolutions to be proposed
at the general meeting.
6. CATEGORISATION OF THE TRANSACTION FOR VUKILE AND ARROWHEAD
From both a Vukile and Arrowhead perspective, the transaction constitutes a category 2 transaction in terms of the
JSE Listings Requirements and accordingly does not require approval by Vukile and Arrowhead’s respective
shareholders.
7. PROPERTY INFORMATION
7.1. Synergy portfolio
7.1.1. The Synergy portfolio comprises 14 retail properties valued at R2 471 100 000 as at 31 July
2016. The properties comprising the Synergy portfolio were valued by either Martin Fitchet
of Knight Frank (Gauteng) Proprietary Limited (“Knight Frank”) or Peter Parfitt of
Quadrant Properties Proprietary Limited (“Quadrant”), both independent external registered
professional valuers.
7.1.2. Detailed valuation reports have been prepared in respect of each of the properties comprising
the Synergy portfolio. A summary of the valuation reports in respect of the Synergy portfolio
will be included in the Synergy circular.
7.1.3. Details of the properties comprising the Synergy portfolio are set out in the table below:
Weighted
average Valuation (R)
GLA rental (R (as at 31 July
Property name Address Province Sector (m2) per/m2) Valuer 2016)
Atlantis City Shopping Centre Wesfleur Close, Atlantis Western Cape Retail 22 115 130.32 Knight Frank 302 100 000
cnr Giyani and Levuba Roads,
Elim Hubyeni Shopping Centre Limpopo Retail 11 874 83.83 Quadrant 127 500 000
Elim
cnr Hans Strydom Avenue and
Emalahleni Highland Mews Watermeyer Street, Del Judor Mpumalanga Retail 17 032 97.33 Knight Frank 224 000 000
Extension 16, Emalanhleni
cnr de Emigratie Road and
Ermelo Game Centre Mpumalanga Retail 6 639 82.12 Quadrant 53 800 000
Voortrekker Avenue, Ermelo
Ny 1 Gugulethu Mall Ny 1 Ny
Gugulethu Square Western Cape Retail 24 955 133.17 Quadrant 415 000 000
25, Gugulethu, Cape Town
Erf 410, cnr Old Warmbaths
Hammanskraal Renbro Shopping
Road (R101) and the R734, Gauteng Retail 13 307 112.73 Knight Frank 156 900 000
Centre
Hammanskraal Extension 1
Weighted
average Valuation (R)
GLA rental (R (as at 31 July
Property name Address Province Sector (m2) per/m2) Valuer 2016)
Hartbeespoort Sediba Shopping
Die Ou Wapad, Hartebeespoort North West Retail 10 669 105.84 Quadrant 121 500 000
Centre
Hillcrest Richdens Shopping
59061 Old Main Road, Hillcrest Kwa-Zulu Natal Retail 10 196 121.72 Knight Frank 137 400 000
Centre
Malandela Road, KwaMashu
KwaMashu Shopping Centre Kwa-Zulu Natal Retail 11 204 105.21 Knight Frank 103 300 000
Unit P, Durban
Consolidated Erf 3013, Corner
Makhado Nzhelele Valley
Main Road and the R523 to Limpopo Retail 5 308 95.40 Knight Frank 55 900 000
Shopping Centre
Thohoyandou
cnr Setai and Motlaing Road,
Phuthaditjhaba Setsing Crescent Free State Retail 20 678 115.68 Quadrant 328 000 000
Phuthaditjhaba
Roodepoort Ruimsig Shopping cnr Dorreen and Malcolm Roads,
Gauteng Retail 11 177 95.37 Knight Frank 119 400 000
Centre Amarosa, Roodepoort
Ulundi King Senzangakona King Senzangakhona Centre,
Kwa-Zulu Natal Retail 22 325 101.66 Knight Frank 262 300 000
Shopping Centre Ulundi
Welgedacht Van Riebeeckshof cnr Van Reibeeckshof, Koelenhof
Kwa-Zulu Natal Retail 5 181 109.74 Knight Frank 64 000 000
Shopping Centre and Delaire Roads, Durban
192 660 110.32 2 471 100 000
Notes:
1. The effective date of the disposal of the Synergy portfolio by Synergy and acquisition thereof by Vukile will be 1 October 2016.
2. The Synergy portfolio (valued at R2 4471 100 000) will be disposed of in exchange for the acquisition of the Vukile portfolio (valued at
R2 433 800 000), plus a cash payment by Vukile to Synergy of R18.2 million, with interest accrued from the effective date to the implementation
date. No purchase price per property is disclosed. The difference between the valuation and the effective acquisition cost is due to the independent
property valuation being an open market value while the acquisition cost is a negotiated exchange.
3. Properties indicated as being valued by Knight Frank were valued by Martin Fitchet, who is an independent external valuer registered in terms of the
Property Valuers Profession Act, (Act 47 of 2000). Properties indicated as being valued by Quadrant were valued by Peter Parfitt, who is an
independent external valuer registered in terms of the Property Valuers Profession Act, (Act 47 of 2000).
7.2. Vukile portfolio
7.2.1. The Vukile portfolio comprises 29 high yielding retail, office and industrial properties valued
at R2 433 800 000 as at 31 July 2016. The properties comprising the Vukile portfolio were
valued by either Martin Fitchet of Knight Frank or Peter Parfitt of Quadrant, both
independent external registered professional valuers.
7.2.2. Detailed valuation reports have been prepared in respect of each of the properties comprising
the Vukile portfolio. A summary of the valuation reports in respect of the Vukile portfolio
will be included in the Synergy circular.
7.2.3. Details of the properties comprising the Vukile portfolio are set out in the table below:
Weighted
average Valuation (R)
GLA rental (as at 31 July
Property name Address Province Sector (m2) (per/m2) Valuer 2016)
73 Willie van Schoor
Cape Town Bellville Suntyger Western Cape Office/Retail 6 344 121.70 Knight Frank 63 600 000
Avenue, Belville
Cape Town Bellville Tijger 3 Tijger Park, Belville Park,
Western Cacpe Office 20 157 97.69 Quadrant 241 300 000
Park Belville
cnr Fritz Spilhaus Avenue
Cape Town Parow Industrial
and Jean Simonis Street, Western Cape Industrial 19 834 39.88 Knight Frank 77 700 000
Park
Parow
Durban Valley View Industrial 24 Otto Volek Road, New
Kwa-Zulu Natal Industrial 30 790 37.11 Quadrant 138 100 000
Park Germany, Durban
East London Vincent Office 59 Western Avenue,
Eastern Cape Office 9 040 101.37 Knight Frank 86 000 000
Park Vincent, East London
Erf 210 Herman Road,
Germiston Meadowdale R24 Gauteng Industrial 35 016 48.01 Knight Frank 177 800 000
Meadowdale, Germiston
36 Boundary Road, Hougton
Jhb Isle of Houghton Gauteng Office 27 249 91.55 Quadrant 283 000 000
Estate
Jhb Parktown 55 Empire Road 55 Empire Road, Parktown Gauteng Office 5 960 90.45 Knight Frank 50 800 000
International Gateway
Business Pkar, off New
Midrand IBG Road, Challenger Avenue Gauteng Office 8 515 95.49 Knight Frank 71 100 000
and Pioneer Avenue,
Midridge Park, Midrand
Pinetown Westmead Kyalami 26-30 Kyalami Road,
Kwa-Zulu Natal Industrial 16 914 48.98 Knight Frank 89 800 000
Industrial Park Westmead, Pinetown
Pretoria Hatfield Festival cnr Arcadia and Festival
Gauteng Office 5 317 91.86 Quadrant 55 000 000
Street Offices Street, Hatfield, Pretoria
Pretoria High Court Chambers 220 Madiba Street, Pretoria Gauteng Office 12 093 74.46 Knight Frank 143 900 000
Pretoria Lynnwood Excel Park 441 Lynwood Road, Pretoria Gauteng Office 3 529 71.91 Quadrant 27 900 000
Weighted
average Valuation (R)
GLA rental (as at 31 July
Property name Address Province Sector (m2) (per/m2) Valuer 2016)
cnr of Sanlam, Alkantrand
Pretoria Lynnwood Sanlynn and Lynwod Streets, Gauteng Office 8 316 139.44 Quadrant 145 000 000
Pretoria
Pretoria Lynnwood Sunwood 379 Queens Crescent Street,
Gauteng Office 6 412 95.35 Quadrant 66 000 000
Park Pretoria East
Pretoria Silverton 22 Axle Industrial/Off
22 Axle Street, Silverton Gauteng 1 817 54.76 Quadrant 11 300 000
Street ice
Pretoria Silverton 34 Bearing 34 Bearing Crescent, Industrial/Off
Gauteng 5 000 47.36 Quadrant 26 200 000
Crescent Silverton ice
Pretoria Silverton 294 Battery Industrial/Off
294 Battery Street, Silverton Gauteng 5 787 37.59 Quadrant 23 600 000
Street ice
Pretoria Silverton 301 Battery Industrial/Off
301 Battery Street, Silverton Gauteng 3 784 50.93 Quadrant 18 500 000
Street ice
Pretoria Silverton 309 Battery Industrial/Off
309 Battery Street, Silverton Gauteng 3 770 47.10 Quadrant 20 900 000
Street ice
Pretoria Silverton 330 Alwyn Industrial/Off
330 Alwyn Street, Silverton Gauteng 1 185 42.96 Quadrant 4 700 000
Street ice
cnr River Road and
Randburg Trevallyn Industrial Industrial/Off
Hyskraan, Randburg Kya Gauteng 32 006 40.99 Quadrant 144 000 000
Park ice
Sands
Randburg Tungsten Industrial 5 CR Swart Drive,
Gauteng Industrial 10 365 49.14 Quadrant 55 400 000
Park Randburg
Roodepoort Robertville 255 Nadine Street,
Gauteng Industrial 28 226 38.83 Knight Frank 92 900 000
Industrial Park Roodepoort
cnr William Nicole Drive,
Sandton Bryanston Grosvenor
Grosevenor Road and Main Gauteng Retail 4 585 118.93 Knight Frank 58 100 000
Shopping Centre
Road, Bryanston
Sandton Bryanston St Andrews
Sloane Street, Bryanston Gauteng Office 10 184 82.84 Knight Frank 86 900 000
Complex
th st 56 400 000
Sandton Hyde Park 50 Sixth cnr 6 Avenue and 1 Road,
Gauteng Office 4 110 119.74 Knight Frank
Road Hyde Park, Johannesburg
Sandton Rivonia 36 36-38 Homestead Street,
Gauteng Office 2 410 84.53 Quadrant 32 000 000
Homestead Road Rivonia
Sandton Sunninghill Place 11 Simba Road, Sunninghill Gauteng Office 8 139 84.40 Quadrant 85 900 000
336 854 65.38 2 433 800 000
Notes:
1. The effective date of the acquisition of the Vukile portfolio by Synergy and disposal thereof by Vukile will be 1 October 2016.
2. The Vukile portfolio (valued at R2 433 800 000) will be disposed of in exchange for the acquisition of the Synergy portfolio (valued at
R2 471 100 000), plus a cash payment by Vukile to Synergy of R18.2 million, with interest accrued from the effective date to the implementation
date. No purchase price per property is disclosed. The difference between the valuation and the effective acquisition cost is due to the independent
property valuation being an open market value while the acquisition cost is a negotiated exchange.
3. Properties indicated as being valued by Knight Frank were valued by Martin Fitchet, who is an independent external valuer registered in terms of the
Property Valuers Profession Act, (Act 47 of 2000). Properties indicated as being valued by Quadrant were valued by Peter Parfitt, who is an
independent external valuer registered in terms of the Property Valuers Profession Act, (Act 47 of 2000).
4. Isle of Houghton is subject to a right of first refusal in favour of a tenant of the property, entitling such tenant to purchase the property on specified
terms. If Vukile is not able to obtain a written waiver in respect of such right of first refusal and such right is exercised such that Isle of Houghton is
sold by Vukile prior to the implementation date, Vukile will pay the purchase price received for the property to Synergy, plus interest determined
from the date of receipt of the purchase price by Vukile to the implementation date.
7.3. Cumulative portfolio
7.3.1. The Cumulative portfolio comprises 100 high-yielding retail, office and industrial properties
valued at R1 893 300 000. The Cumulative portfolio was valued by Theuns Behrens of Real
Insight Proprietary Limited (“Real Insight”), an independent external registered professional
valuer.
7.3.2. Detailed valuation reports have been prepared in respect of each of the properties comprising
the Cumulative portfolio. A summary of the valuation reports in respect of the Cumulative
portfolio will be included in the Synergy circular.
7.3.3. Details of the properties comprising the Cumulative portfolio are set out in the table below:
Weighted
Valuation (R)
GLA average
Property name Address Province Sector (as at 31 July
(m2) rental
2016)
(per/m2)
101 Dorp Street GVT 101 Dorp Street Limpopo Office 5 093 88.36 42 300 000
105 Landdros Mare Street & 106
105 Landdros Mare Street & 106 Mark Street Limpopo Retail 571 95.50 6 300 000
Mark Street
106 Landdros Mare Street 106 Landdros Mare Street Limpopo Retail 1 200 98.76 11 500 000
135 Pietermaritz Street 135 Pietermaritz Street Kwa-Zulu Natal Office 2 198 96.31 23 800 000
137 Sivewright 131 Sivewright Avenue Gauteng Office 4 792 70.51 27 600 000
151/155 Juniper Road 151 - 155 Juniper Road Kwa-Zulu Natal Office 1 561 110.49 13 800 000
16/18 Forge Rd 16 & 18 Forge Road Gauteng Industrial 3 166 34.29 9 000 000
21 Dartfield (Omlap) 21 Dartfield Field Gauteng Industrial 1 016 55.66 5 800 000
249 Commissioner 141 Albertina Sisulu Gauteng Industrial 1 120 41.40 4 200 000
38 Derrick Road 38 Derrick Road Gauteng Industrial 3 846 43.68 15 000 000
38 Prospecton Road 38 Prospection Road Kwa-Zulu Natal Mixed Use 1 528 118.41 17 300 000
4 Weightman Avenue 4 Weightman Avenue Kwa-Zulu Natal Retail 4 171 70.65 34 500 000
Weighted
Valuation (R)
GLA average
Property name Address Province Sector (as at 31 July
(m2) rental
2016)
(per/m2)
46 Steel Road 46 Steel Road Gauteng Industrial 3 790 41.15 16 000 000
9 Montague Drive 9 Montague Drive Western Cape Industrial 2 649 66.68 18 400 000
Absa Gezina 840 Steve Biko Road, Gezina Gauteng Retail 2 053 105.12 22 400 000
Absa Heidelberg 42 Ueckermann, Heidelberg Gauteng Retail 777 118.08 3 500 000
Cnr Hendrik Verwoerd & 2nd Ave ,
Absa Nigel Gauteng Retail 961 88.52 8 100 000
Nigel
ABSA Randburg 308 Oak Avenue Gauteng Retail 1 533 38.79 4 900 000
Bedford 4-6 Skeen Blvd Gauteng Office 9 095 93.41 82 200 000
Beka Bloemfontein 82 Long Street , Hilton Free State Industrial 400 67.22 2 300 000
17 Cordova Place, Briardene
Beka Durban Kwa-Zulu Natal Industrial 490 92.14 2 800 000
Industrial Park
Citizens Building Kimberley 8 - 14 Jones Road Northern Cape Retail 840 79.58 5 800 000
Citizens Cape Town 177 Main Road Western Cape Retail 1 480 121.37 17 300 000
CMH Spartan 60 Steel Road Gauteng Industrial 2 467 37.42 8 900 000
Corpgro Welkom Cnr 2nd & 3rd Streets Free State Industrial 4 401 7.33 2 500 000
Creston 49 - 51 Forge Road Gauteng Industrial 6,546 40.52 24 600 000
Dep
