R1,57 billion Growthpoint management buy in

Posted On Wednesday, 30 May 2007 02:00 Published by
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In what could potentially be described as an industry changing transaction, Growthpoint Properties Limited announced today that it would acquire the property administration business of Investec Property Group.

In what could potentially be described as an industry changing transaction, Growthpoint Properties Limited announced today that it would acquire the property administration business of Investec Property Group, a wholly owned subsidiary of Investec Limited, and the property fund management business from Investec Property Group and BEE owners AMU Trust and Phatsima Properties (Pty) Limited.

The R1,57 billion yield enhancing transaction, representing an effective yield of 9,26% for Growthpoint, provides for the seamless transition from external to internal management for South Africa’s largest property holding and investment company. The proposed transaction will springboard Growthpoint’s market capitalisation to in excess of R19 billion.

“Investec Property Group has, over five years, successfully nurtured and built up Growthpoint from R90 million in assets to the sector-leading property company it is today with some R20 billion in assets,” notes Growthpoint Properties Limited CEO Norbert Sasse.

“Growthpoint has now come of age. The company is approaching it long expressed vision of inclusion in the JSE Alsi Top 40 Index. As South Africa’s largest property holding and investment company, the Growthpoint board of directors are of the view that the company should have its own management and should conform with trends in the international property and Real Estate Investment Trust (“REIT”) industry,” says Sam Hackner, Growthpoint Chairman..

Investec Property Group is the appointed asset manager to Growthpoint and the property administrator of the Growthpoint property portfolio. This transaction will result in these functions being performed internally by Growthpoint, which will eliminate perceived conflicts of interest arising from the current external management model.

“International investors predominantly favour internally managed property funds over those which are externally managed. Growthpoint is preparing itself for the introduction of the REIT structure in South Africa. In a REIT environment most property funds are internally managed,” explains Sasse.

Further benefits for Growthpoint include the removal of the asset management fee which will allow Growthpoint to be more competitive in pricing new acquisitions as well as accomplish increased cost savings and the achievement of economies of scale from employing own staff versus paying a management fee.

Growthpoint has agreed to acquire the Investec Property Group’s property fund management and property administration businesses, including the pro rata share of the right to income from the Manco agreements owned by the BEE partners, for a total aggregate purchase consideration of R1,57 billion. The purchase price will be settled through the issue of 98,3 million new Growthpoint linked units at a price of R16 per linked units, ex distribution for the six-month period ending 30 June 2007.

An independent subcommittee of the Growthpoint board of directors comprising independent non-executive directors not linked to the related parties has already approved the transaction, as have the independent non-executive directors on the Growthpoint board.

As this is considered a related party transaction in terms of the JSE Limited’s listing requirements, an independent fair and reasonable opinion will be obtained and circulated to Growthpoint linked unitholders.

The Investec Property Group businesses purchased by Growthpoint currently employ some 243 members of staff, located in Johannesburg, Durban and Cape Town, who will be transferred to Growthpoint where they will be re-employed and retain benefits which accrued during their tenure with Investec.

Ensuring continuation of management, Sam Hackner will continue to serve as Chairman of Growthpoint Properties Limited, Norbert Sasse will continue to serve as CEO, Estienne de Klerk as fund executive and Stuart Snowball as CFO. All staff and systems will also be retained. The established culture, values and philosophies of Investec will be perpetuated in the future Growthpoint.

Furthermore all executives and staff will be included in a new staff share incentive scheme to be implemented by Growthpoint, which is to include an initial allocation of approximately 11 million fully-paid linked units placed into an executive and staff share trust. This will serve to ensure the retention of key staff and executives, motivate staff to drive the business to a new level, align interests of staff and executive management with those of linked unitholders and ensure that executives have a meaningful stake in the company.

“Growthpoint will enjoy a continued relationship with Investec Property Group, embedded in a co-operation agreement between the parties,” assures Sasse.

Investec Property Group’s property development and listed property investment management businesses will not form part of the proposed transaction. In terms of this agreement, Investec Property Group will first offer Growthpoint any new property developments it undertakes. In turn, Growthpoint will first offer new and redevelopment opportunities in its portfolio to Investec Property Group’s property development business. In addition Growthpoint will administer all properties owned by Investec Property Group while Investec Property Group will first offer the properties it owns, in terms of Bare Dominium structures, to Growthpoint.

The effective date of the proposed transaction, which is subject to the fulfilment of various suspensive conditions including regulatory approvals from various authorities and Growthpoint linked unitholder approval, is 1 July 2007.

Publisher: Growthpoint Properties Limited
Source: Growthpoint Properties Limited

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