Redefine Income Fund Limited and Spearhead Property Holdings Limited announced today that Redefine has made an offer to Spearhead unitholders to acquire all the Spearhead linked units it does not already own. The deal is valued at R1,3 billion making it one of the largest corporate actions within the JSE listed property sector in recent years.

This deal is supported by Spearhead’s board of directors and, if successful, will result in leading property loan stock company Spearhead, with a portfolio of properties valued at nearly R1,6 billion, becoming a wholly owned subsidiary of South Africa’s top performing JSE-listed property holding and investment company of 2005, Redefine.

Redefine’s intention is to implement the proposed transaction by way of a scheme of arrangement, which is scheduled to become effective in September 2006, depending on obtaining various approvals and sanctions. In terms of the scheme Spearhead linked unitholders will receive new Redefine linked units based on a swap ratio of 6.18 Redefine linked units for every 1 Spearhead linked unit held.

At the current aggregate trading price of Redefine’s linked units of R5, this equates to R30.90 per Spearhead linked unit.

CEO of Redefine Income Fund, Brian Azizollahoff, notes that the acquisition of Spearhead will be immediately yield enhancing for Redefine linked unitholders and should result in substantial growth in earnings.

“The acquisition offer has been made to further the strategic growth of both Redefine and Spearhead’s portfolio of quality properties in prime locations with predominantly blue chip tenants. This represents an ideal synergy and opportunity,” said Azizollahoff.

Spearhead linked unitholders may elect to swap their linked units for 100% Redefine linked units or cash.  Up to 50% of the total transaction value is available in cash so a unit holder who elects to receive the cash consideration in respect of more than 50% of their Spearhead linked units will only be accommodated to the extent that other Spearhead unit holders elect to receive Redefine linked units in respect of more than 50% of their Spearhead units. The cash underpin will thus equate to R15.50 per Spearhead linked unit.

“For Spearhead’s linked unitholders, the deal represents a 15% growth in distributions and a material capital benefit immediately resulting from the premium of 10%, on Monday, 24 July 2006’s unit prices,” explains Mike Flax, CEO of Spearhead Property Holdings Limited.

Flax reports that eligible Spearhead linked unitholders controlling approximately 60% of Spearhead’s linked units, have indicated their support for the transaction. The requisite majority is 75% for implementation of the scheme and termination of the listing of Spearhead’s linked units on the JSE.

“This offer represents new opportunities and greater earning potential to both shareholders and staff and it is likely to receive widespread approval,” says Flax.

Flax explains that benefits for Spearhead linked unitholders, in addition to the capital advantage, include the continuity of asset management. Flax will be joining Redefine’s asset managers Madison Property Fund Managers as an executive director. Many of the top Spearhead executives will also join the Madison stable while the balance of the Spearhead staff will remain involved in the day-to-day management of the properties under Redefine’s ownership.

He elaborates that the heightened regional risk that Spearhead experienced resulting from its focused Western Cape portfolio, will be substantially diminished as part of a national group which will lead to greater security.

“Should the deal be successful it will create a property loan stock with a market capitalisation of some R3.5 billion and makes Spearhead linked unitholders part of a far larger and more diversified group which operates nationally,” says Azizollahoff.

He notes that the increased economies of scale will be of benefit across all areas of asset management, notably the higher liquidity which will arise from the larger portfolio, attracting better debt funding rates and facilitating increased competitiveness.

Azizollahoff explains that the proposed acquisition will also further Redefine’s strategic growth in the Western Cape including Spearhead’s landmark properties Knowledge Park at Century City, Pier Place in the Cape Town CBD and Ottery Hypermarket.

The combined portfolio will result in a more balanced geographical distribution within the Redefine portfolio, taking it from 74% of properties by GLA in Gauteng, 12% in the Western Cape, 10% in KwaZulu Natal the remaining 4% in three other provinces, to 49% in Gauteng, 42% in the Western Cape, 7% in KwaZulu Natal the remaining 2% in three other provinces.

Redefine’s sectoral spread will also see an increase in retail property from 22% to 24%, its exposure to industrial property will remain constant at 36% and offices will go from 42% to 40% in the combined portfolio.

Furthermore Azizollahoff points out that the deal would create a property development pipeline for Redefine with Spearhead’s forthcoming R230 million Cape Town CBD office block Convention Tower and South Africa’s first ever retail outlet centre Sable Square.

Enhancing Redefine’s asset base, yield and distribution growth, the development skills required for both development and trading will also now be available to the fund.
 
The scheme required for Spearhead’s incorporation into Redefine requires the sanction of the High Court of South Africa. Suspensive conditions include the shareholder approvals as well as those of the Securities Regulation Panel, JSE Limited, South African Reserve Bank, the Competition Authorities and other regulatory authorities.

~ Ends ~
Issued on behalf of Redefine Income Fund Limited and Spearhead Property Holdings Limited

Redefine Income Fund                             Spearhead Property Holdings
Brian Azizollahoff                                      Mike Flax

T:011 283 0110                                         T:021 425 1000

C:083 255 2351                                         C:083 375 0295