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Growthpoint - Growthpoint Black Economic Empowerment Transaction
GROWTHPOINT PROPERTIES LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1987/004988/06)
Share code: GRT ISIN: ZAE000037669
(`Growthpoint` or `the company`)
GROWTHPOINT BLACK ECONOMIC EMPOWERMENT (`BEE`) TRANSACTION
1. INTRODUCTION AND RATIONALE
Investec Bank Limited is authorised to announce that Growthpoint has entered
into various agreements in order to facilitate the acquisition by a Consortium
of BEE Partners (the `BEE Consortium`) of 100 million Growthpoint linked units
amounting to 14.2% of the total Growthpoint linked units currently in issue,
which units have a current market value of R1.01 billion (`BEE Transaction`).
Growthpoint and its Board of Directors (`the Board`) are committed to assist in
the achievement of meaningful participation by Historically Disadvantaged South
Africans (`HDSAs`) in the country`s economy.
As an integral part of the transaction, the BEE Consortium has also acquired a
14.2% interest in the Growthpoint asset management contract from Investec
Property Group Limited. This transaction (the `BEE Manco Transaction`) entitles
the BEE Consortium to 14.2% of the asset management fee arising from the asset
management agreement concluded between Growthpoint and Growthpoint Managers
(Proprietary) Limited in respect of the management of Growthpoint`s property
portfolio.
The Board believes that the implementation of the BEE Transaction and the BEE
Manco Transaction (collectively the `BEE Transactions`), as well as the new
Board appointments referred to in paragraph 7 below, are major steps towards
addressing Growthpoint`s BEE equity ownership and control responsibilities as
are currently required under the Department of Trade and Industry Codes of Good
Practice on Broad Based Black Economic Empowerment and the draft Property Sector
Transformation Charter.
2. GROWTHPOINT BEE PRINCIPALS
In structuring the BEE Transactions, Growthpoint developed a set of objectives
(the `BEE objectives`) to ensure:
- the BEE Consortium includes influential role players who can add value to
Growthpoint and its linked unitholders but at the same time ensuring the BEE
Transactions benefit a broad base of HDSAs;
- the BEE Consortium assists Growthpoint, on an ongoing basis, in meeting the
requirements of the Broad Based Black Economic Empowerment Act, No. 53 of 2003,
as amended (the `BBBEE Act`) and the Property Sector Transformation Charter once
it becomes effective;
- the economic interest and voting rights are transferred to the BEE Consortium
upfront;
- the BEE Consortium remains an investor in, and a partner of, Growthpoint for
at least seven years (the `lock-in period`);
- the BEE Transactions are sustainable and value enhancing for the BEE
Consortium and Growthpoint linked unitholders without any significant up-front
cost to Growhtpoint; and
- the dilution to Growthpoint linked unitholders is kept to a minimum.
3. BACKGROUND ON THE BEE CONSORTIUM
Based upon the BEE objectives the Board identified Amabubesi Investments
(Proprietary) Limited (`Amabubesi`), Miganu Investment Holdings (Proprietary)
Limited (`Miganu`) and Unipalm Investment Holdings Limited (`Unipalm`) to form
the partners in the BEE Consortium (the `Consortium Members`)
3.1 Amabubesi Consortium
Amabubesi is a new generation black controlled and managed investment holding
company led by Chairman, Bulelani Ngcuka. The company was incorporated in 2002
and has to date pursued strategic investments in the information technology,
security, transport and logistics, healthcare, motor retailing as well as
leisure and tourism sectors.
Amabubesi has an effective 80% interest in the Amabubesi Consortium whilst
Desert Wind Properties (Proprietary) Limited, a company controlled and managed
by black women has a 15% interest, with a 5% interest benefiting a broad based
community trust. Other key members of the Amabubesi Consortium, which is
controlled by HDSA`s, include Sango Ntsaluba (CEO), Thabiso Tlelai and Peter
Moyo, all successful business people in their own right.
3.2 Miganu
Miganu is a wholly black owned and managed investment holding company formed in
2002 by Mzolisi Diliza to provide a platform for the consolidation of various
investments in mining companies Imbewu Mineral Resources (Pty) Limited and
Africa Wide Investment Holdings (Pty) Limited, as well as to pursue other
investments in the mining, property, information, communication and technology,
healthcare and leisure & tourism sectors.
A key member and significant investor in Miganu is Dr. Penuell Maduna, former
Minister of Justice and Constitutional Affairs, whilst the company also has a
broad based rural community trust as one of the main beneficiaries.
Miganu targets investment opportunities where it can add value and where the
investment is underpinned by high growth potential, sustainable cash flows,
competent management and where the company has a profitable track record and a
strong balance sheet. Miganu believes Growthpoint meets the above criteria.
3.3 Unipalm
Unipalm is a black owned and managed company established in 2001 and chaired by
Thandi Ramathesele. The largest shareholder in Unipalm, with an 18% interest, is
Afripalm, which is an investment vehicle owned by Ragavan Moonsamy and Lazarus
Zim.
The Unipalm shareholder base includes a national broad base of 35 000 people
including women, with strong rural and urban participation. Unipalm CEO, Ragavan
Moonsamy, first embarked on an extensive capital raising exercise in 2001
amongst the communities across South Africa to capitalise the company. Unipalm
is an independent black empowerment group and has already made a large number of
investments into various sectors including agriculture, media, tourism,
engineering, professional services and property.
The company is committed to continue bringing in as many HDSA`s as it can into
the formal economic sector.
4. THE BEE TRANSACTION
The BEE Consortium will effectively acquire 100 million or 14.2% of the total
Growthpoint linked units currently in issue. Based on the closing market price
of the Growthpoint linked units of R10.14 (`market price`) on 29 August 2005 the
market value of the investment is R1.01 billion.
4.1 BEE interest in the Consortium
The participation by the Consortium Members in the BEE Consortium, the effective
participation in Growthpoint linked units and the approximate value of such
participation based on the market price are set out in the table below:
Interest in the Effective interest Current
BEE Consortium in Growthpoint market value
% % (R`million)
Amabubesi 33.3 4.7 338
Miganu 33.3 4.7 338
Unipalm 33.3 4.7 338
BEE Consortium 100.0 14.2 1 014
4.2 Terms of participation by the Consortium Members
Salient features of participation by the Consortium Members in the BEE
Transaction are as follows:
- the Consortium Members are not entitled to sell or alienate their interest in
Growthpoint for the lock-in period;
- the Consortium Members must be and remain to be controlled by broad based BEE
entities and/or individuals for the duration of the lock-in period to the extent
required by the BBBEE Act and all other applicable laws and regulations from
time to time; and
- following the expiry of the lock-in period, should the BEE Consortium wish to
dispose of their interest in Growthpoint, or any part thereof, and there is
still a requirement for Growthpoint to maintain its BEE equity ownership, the
BEE Consortium will be required to sell their interest, or the relevant part
thereof, to a third party that will maintain its BEE status.
5. SALIENT TERMS OF THE BEE TRANSACTIONS AND FUNDING
The BEE Consortium will acquire 100 million Growthpoint linked units as
follows:
- 52.5 million Growthpoint linked units from the Mines Pension Funds; and
- 47.5 million Growthpoint linked units from Investec Employee Benefits Limited.
Each of ABSA Group Limited and Old Mutual Specialised Finance (Proprietary)
Limited will advance R348 million, or R696 million in aggregate, of senior and
junior funding to partly fund the BEE Transaction.
Growthpoint will advance mezzanine funding of R204 million to fund the
acquisition of Growthpoint debentures. At the settlement date of the mezzanine
funding, the BEE Consortium will pay to Growthpoint, to the extent that funds
are available, an additional 2% interest per annum and a further amount
calculated to be 40% of the net equity upside of the BEE Consortium. The total
return to Growthpoint will be capped at a hurdle rate.
All funding will be provided on a 10-year basis with an election by the lenders
to review their funding after seven years.
Investec Private Bank will provide a facility of up to R36,5 million to the BEE
Consortium to fund the equity participation of the BEE Consortium of R5 million
in the BEE Transaction and to fund the BEE Manco Transaction.
6. SUMMARISED BEE TRANSACTION STRUCTURE
A summarised BEE transaction structure is set out in the diagram which can be
viewed in the press.
7. BOARD REPRESENTATION
The Growthpoint Board appoints Bulelani Ngcuka and Ragavan Moonsamy as non-
executive directors to the Board at the next Board meeting to join Mzolisi
Diliza who is already a non-executive director.
For and on behalf of the board
Growthpoint Properties Limited
Sandton
30 August 2005
Investment bank and transaction adviser
Investec Corporate Finance
Investec Bank Limited
(Registration number 1969/004763/06)
Sponsor to Growthpoint
Investec Bank Limited
(Registration number 1969/004763/06)
Lead arranger and transaction adviser
Investec Treasury and Specialised Finance
Investec Bank Limited
(Registration number 1969/004763/06)
Legal adviser to Growthpoint
JOWELL GLYN & MARAIS
Legal adviser to BEE Consortium
SMITH TABATA BUCHANAN BOYES
Attorneys
Lender
ABSA
Co-arranger and lender
OLD MUTUAL
