Presenter: Lindsay Williams  Guest(s): Brian Azizollahoff 

Redefine Income Fund makes an offer to Spearhead unit holders to acquire all their linked units for a total consideration of R1.3-billion in one of the largest corporate actions in the listed property sector. With Redefine chief executive Brian Azizollahoff, and Greg Potter from Nedcor Securities

LINDSAY WILLIAMS: Brian, can you tell us about the deal?

BRIAN AZIZOLLAHOFF: It’s a great deal from Redefine’s point of view - it’s income enhancing, and that’s the kind of deal we look to do. It increases our exposure to the Western Cape - properties there have been rather elusive to us recently because we haven’t been able to find the value that we’ve been looking for. It brings on board a new skillset - the management team from Spearhead is joining Madison and their developments currently underway are worth almost R600-million. These are all coming into Redefine, and they’re all being done at good yields - so we should see very good growth coming out of the expanded portfolio. From a Spearhead unit holder’s point of view value is going to be unlocked, and it should give the Spearhead unit holders that are going to take Redefine units additional liquidity.

LINDSAY WILLIAMS: Last week I was speaking to Mike Flax from Spearhead - he was up from Cape Town for an interview on Summit TV. He’s about six-foot-six and he crushed my hand when he shook it. He was very optimistic about the Western Cape property sector - very much Western Cape specialists - is that the major reason for diversifying geographically?

BRIAN AZIZOLLAHOFF: That’s not the major reason. It’s an important reason, but not the major reason - the major reason is that we’ve been looking to grow the fund. We haven’t grown the fund at the expense of existing unit holders’ income - so we’ve been looking for corporate opportunities that would enhance income. This one came along some time ago. Marc Wainer broached the subject with Mike, and Mike was quite tickled by the idea. As he put it this broadens the horizons for management.

LINDSAY WILLIAMS: The share price was down 0.4% for Redefine, and up 3.1% for Spearhead. Can you give us the actual mechanics of the deal, and where we go from here?

BRIAN AZIZOLLAHOFF: We’ve made the formal offer to Spearhead unit holders. We had to get indications of support from Spearhead unit holders, which we have. We now do a scheme of arrangement - so we have to prepare the documentation and make the application to the High Court. We have to prepare circulars both for Redefine and Spearhead that get sent to the respective unit holders who will have to vote on the transaction. Competition Commission submissions have to be made. We’re looking at probably two to three months.

LINDSAY WILLIAMS: That’s not so long. The close was R29.50 for Spearhead. What are you offering?

BRIAN AZIZOLLAHOFF: In terms of a swap ratio it’s 6.18 Redefine units for every Spearhead unit.

GREG POTTER: Brian, I’m sure I did see a cash component - was there a cash component?

BRIAN AZIZOLLAHOFF: Yes, there was. Spearhead unit holders may elect to take cash - although we’re limiting the cash amount to 50% of the transaction.

GREG POTTER: That’s at R31 a share - if I read correctly?

BRIAN AZIZOLLAHOFF: Correct. There’s a cash underpin at R15.50.

LINDSAY WILLIAMS: Redefine closed at R4.86 per linked unit, and R29.50 for Spearhead.