Oct 15, 2007:
Redefine Income Fund, the fourth largest property loan stock company listed on the JSE Limited today announced that it will give effect to a Broad-based Black Economic Empowerment (B-BBEE) transaction
In terms of the agreement 80 million Redefine linked units, constituting just under 10% of the current issued linked units in Redefine, are to be issued to selected B-BBEE parties.
“This equity transaction constitutes an integral part of Redefine’s commitment to black economic empowerment and to the principles of the DTI Codes of Good Practice and the Property Charter. It is our first step in actively introducing broad based black economic empowerment on an ownership level and Redefine and its partners are incredibly proud of the results,” says Redefine Income Fund CEO Brian Azizollahoff. Following its implementation approximately 15,5% of the Redefine linked units will be held by black unit holders.
The B-BBEE transaction will entail the issue of 80 million Redefine linked units for an aggregate cash amount of R548 million to the B-BBEE participants. The linked units are to be issued at a price of R6,85 per linked unit, a discount of approximately 15% to the market price of Redefine linked units at close of trade on 8 October 2007 of R8,08.
“The economic cost of the transaction is 1,5% of Redefine’s market capitalisation at the date of this announcement, reflecting the discount to market value at which the linked units are being issued. Redefine believes that this cost will be outweighed by the commercial and strategic benefits to be derived from the transaction as well as its related strategies and transformation objectives in the medium to long term,” notes Azizollahoff.
“The BEE transaction will have the effect of vesting ownership of Redefine in broad-based participants above the levels imposed in terms of the Property Charter and the DTI Codes,” explains Marian Gaylard of Redefine’s corporate advisor, legal advisor and sponsor, Java Capital.
The B-BBEE parties comprise both strategic empowerment partners, which have synergies with Redefine as they are active in the property sector, and broad based empowerment partners who are involved in community development and upliftment of previously disadvantaged South Africans. Of the new linked unit, 48 million will be issued to strategic empowerment partners, while the remaining 32 million will be issued to broad-based empowerment partners.
The strategic empowerment partners are Ngatana Property Investments which will acquire 25% of the linked units issued, Mtshobela Capital Holdings 10%, Vunani Capital 10%, Clearwater Capital 10% and Loato Properties 5%.
“We are proud to be able to further strengthen ties with Redefine through this innovative empowerment transaction. This BEE transaction will allow the wealth created through Redefine to also benefit people at a real grassroots level, which is the intention and spirit of the BEE Charter,” says Ngatana Property Investments founding director, Lance Manala.
As a strategic partner Ngatana will be able to assist Redefine with deal flow through its considerable network, particularly in the Western Cape. Manala commends Redefine for including a host of broad based organizations that would otherwise not have been able to participate in a transaction of this nature.
The broad-based empowerment partners are Phuthanang Youth Trust, African Lotus Education and Development Trust, MaAfrika Tikkun and Basadi Bapono, which will each acquire 10% of the new linked units.
“Redefine and its asset managers, Madison Property Fund Managers Limited, must be acknowledged for their foresight. For broad based community development organisations to be sustainable they need to build a solid equity base. The model of relying on goodwill to fund community programmes does not provide sustainability. In order to develop communities and our youth, we have to have an income stream we can rely on and dividend flow from equity means that we can realise goals and plan for the long-term,” says Marc Lubner, CEO of MaAfrika Tikkun.
Lubner stresses that conversely, Redefine’s broad based empowerment partners will assist the company in ensuring that its social responsibility strategies are effective and, importantly, that they provide return on investment. “This is the first step in a long-term sustainable partnership in community development. Together we will strive for more intelligent ways of looking at corporate involvement in community development and charity,” says Lubner.
Azizollahoff explains that Redefine considers the broad based empowerment element of this transaction as part of the company’s practice as a responsible corporate citizen. “In addition to ensuring the sustainability of the community development projects and empowerment initiatives, it also opens the doors of property ownership and participation in the property sector,” says Azizollahoff.
The transaction has been made possible as a result of innovative funding structures provided by finance partners, which were integral to the initiative, RMB and The Standard Bank of South Africa Limited.
“The finance for this deal has been packaged in an original and interesting way and is a landmark transaction for all parties. It has been incredibly rewarding working with innovative partners who have the ability to envisage excellent solutions and exciting structures. The transaction has facilitated true broad based empowerment which has created an advantage for people who would otherwise not be able to benefit from, or have access to, a leading JSE-listed company,” says Andre van der Veer of RMB Equities.
The BEE participants will be entitled to all voting rights attaching to the BEE units from the date on which the units are issued to them. They will not be entitled to dispose of the BEE units for a period of seven years from their issue, except in terms of the finance agreement.
The transaction is subject to Redefine linked unitholder approval and the requisite regulatory approval.