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LIBERTY TWO DEGREES LIMITED LIBERTY GROUP LIMITED
(Incorporated in the Republic of South Africa) (Incorporated in the Republic of South Africa)
(Registration number 2018/388906/06) (Registration number 1957/002788/06)
(Approved as a REIT by the JSE) (“LGL”)
Share code: L2D ISIN: ZAE000260576
(“L2D”)
JOINT ANNOUNCEMENT OF LGL’S FIRM INTENTION TO ACQUIRE THE ISSUED ORDINARY SHARES IN L2D
NOT ALREADY OWNED BY LGL, LGL RELATED ENTITIES OR A SUBSIDIARY OF L2D BY WAY OF A SCHEME
OF ARRANGEMENT WHICH WILL RESULT IN THE DELISTING OF ALL L2D ORDINARY SHARES
1. INTRODUCTION
1.1 Shareholders of L2D (“L2D Shareholders”) are advised that on 27 July 2023 L2D and LGL entered
into an implementation agreement in terms of which L2D will propose a scheme of arrangement
(“Scheme”) between L2D and its shareholders, in terms of section 114(1) read with section 115
of the Companies Act, 71 of 2008 (“Companies Act”). In terms of the Scheme, if implemented,
LGL will acquire all of L2D’s issued ordinary shares (“Shares”), excluding Shares that are owned by
Liberty Holdings Limited (“LHL”, being the sole shareholder of LGL) and its subsidiaries (“Excluded
Shareholders”) or Shares that are owned by those L2D Shareholders who validly exercise their
appraisal rights in terms of section 164 of the Companies Act (“Dissenting Shareholders”), in
exchange for a cash consideration of R5.55 per L2D Share (“Scheme Consideration”) (the
“Transaction”).
1.2 If the Scheme becomes operative, Scheme Participants (as defined in paragraph 4.1) will receive
the Scheme Consideration per Share owned by them and, if applicable, a Clean-Out Distribution
(as defined in paragraph 5.1.2). Following implementation of the Scheme, the listing of the Shares
on the Main Board of the JSE Limited (“JSE”) will be terminated (“Delisting”). LGL will consider
implementing a structure alignment of the L2D business post implementation of the Scheme
(“Structure Alignment”).
1.3 The purpose of this joint firm intention announcement (“FIA”) is to, inter alia, advise L2D
Shareholders of the terms and conditions of the Transaction.
2. INFORMATION ABOUT LGL
2.1 LGL is a long-term insurance company licensed in accordance with the Insurance Act 18 of 2017.
LGL is a wholly-owned subsidiary of Standard Bank Group Limited (“SBG”) and has been in
operation since 1957.
2.2 L2D is the co-owner of a portfolio of 15 properties (7 retail, 5 specialised, 2 hotels and 1 office)
known as the Liberty Property Portfolio (“LPP”) with an aggregate value of R8.2 billion as at
31 December 2022.
2.3 LGL currently holds c.61% of the Shares (excluding treasury shares) and co-owns the LPP together
with L2D. LGL holds a 66.7% interest in the LPP whilst L2D, through its wholly-owned subsidiary
2 Degrees Properties Proprietary Limited (“2DP”), holds the remaining 33.3% interest (excluding
the interests of third party co-owners in certain properties). The LPP is managed by 2DP on behalf
of itself and L2D.
3. RATIONALE FOR THE TRANSACTION
3.1 In December 2016 L2D listed, as an ungeared collective investment scheme in property (“CISP”),
all its units in the Diversified REITs sector on the Main Board of the JSE. Subsequently, L2D was
converted from a CISP to a corporate REIT and it internalised the management of its assets to
better position L2D relative to its peers in the market.
3.2 The JSE listing of L2D has remained challenging due to several factors. The macro-economic
environment has resulted in a valuation deterioration across the listed property sector since 2018,
exacerbated by the Covid-19 pandemic. The relative illiquidity of L2D, primarily as a result of a
limited free float, further contributes to the discount at which L2D Shares trade relative to
underlying net asset value. Notwithstanding L2D’s high-quality assets and market-leading
operational performance, these adverse market conditions appear likely to endure for the
foreseeable future and limit the strategic options that are available to L2D while it remains in the
listed environment.
3.3 Against this backdrop, LGL is of the view that the options to unlock the full potential of the L2D
property portfolio would be enhanced through a consolidation of L2D’s ownership within LGL and
the management of the consolidated portfolio outside of the listed environment.
3.4 The Transaction would also afford minority L2D Shareholders the opportunity to exit their
investment in L2D at a significant premium to the market price as detailed in paragraph 4.2, which
would otherwise be a challenge in the current market.
4. TERMS AND CONDITIONS OF THE SCHEME
4.1 Scheme Participants
The participants in the Scheme shall be L2D Shareholders (other than the Excluded Shareholders
and any Dissenting Shareholders) who are registered as such in L2D’s register of shareholders
(“Register”) on the date and time by which L2D Shareholders must be recorded in the Register
in order to be eligible to receive the Scheme Consideration (“Scheme Participants”).
4.2 Scheme Consideration
The Scheme Consideration of R5.55 per L2D Share represents a premium to the following L2D
Share price metrics on the JSE on 25 July 2023, being the last trading day prior to finalisation of
this FIA. These share price metrics have not been adjusted to reflect any Ordinary Distribution (as
defined in paragraph 5.1.1), and as such, are not reflective of a theoretical "clean price".
L2D Shares as at Premium
25 July 2023 (5)
Market price(1) R3.76 47.6%
(2)
30-day VWAP R3.79 46.4%
60-day VWAP(3) R3.79 46.4%
90-day VWAP(4) R3.82 45.3%
Notes:
(1) The “market price” represents the closing price of the Shares on the JSE on 25 July 2023,
being the last trading day prior to the finalisation of this FIA.
(2) The “30-day VWAP” represents the volume weighted average price (“VWAP”) at which the
Shares traded on the JSE for the 30 trading days up to and including 25 July 2023, being the
last trading day prior to the finalisation of this FIA.
(3) The “60-day VWAP” represents the VWAP at which the Shares traded on the JSE for the
60 trading days up to and including 25 July 2023, being the last trading day prior to the
finalisation of this FIA.
(4) The “90-day VWAP” represents the VWAP at which the Shares traded on the JSE for the
90 trading days up to and including 25 July 2023, being the last trading day prior to the
finalisation of this FIA.
4.3 Scheme Conditions
4.3.1 The implementation of the Scheme will be subject to the fulfilment (or, where applicable, waiver)
of the suspensive conditions (“Scheme Conditions”) that:
4.3.1.1 on or before 30 September 2023, L2D shall have obtained such approvals of the JSE, the Takeover
Regulation Panel (“TRP”) and the Financial Surveillance Department of the South African Reserve
Bank (“FinSurv”) as may be required for L2D to send the Scheme circular (“Scheme Circular”) to
L2D Shareholders;
4.3.1.2 on or before 23:59 on 31 December 2023, (provided that each of L2D and LGL shall (in its sole
discretion but subject to the approval of the TRP) be entitled, by giving notice in writing to the
other on one occasion only, to extend this date for a period of not more than 120 days) (“Long
Stop Date”):
4.3.1.2.1 the special resolution approving the Scheme (“Scheme Resolution”) shall have been
approved by L2D Shareholders (excluding the Excluded Shareholders) as required by section
115(2)(a) of the Companies Act;
4.3.1.2.2 appraisal rights have not been validly exercised (by (i) delivering notice objecting to the
Scheme Resolution as contemplated in section 164(3) of the Companies Act; (ii) voting against
the Scheme Resolution; and (iii) delivering a valid demand as contemplated in sections 164(5)
to 164(8) of the Companies Act within the time periods described in sections 164(3) and
164(7) of the Companies Act) in respect of more than 3% of the Shares;
4.3.1.2.3 if the Scheme Resolution is opposed by 15% or more of the voting rights exercised on the
Scheme Resolution and, within five business days after the vote, any person who voted
against the Scheme Resolution requires L2D to seek approval of a court in terms of section
115(3)(a) of the Companies Act, the court has approved implementation of the Scheme
Resolution;
4.3.1.2.4 if any person who voted against the Scheme Resolution applies to court in terms of Section
115(3)(b) of the Companies Act, either:
4.3.1.2.4.1 the court has declined to grant leave to that person for a review of the Scheme Resolution; or
4.3.1.2.4.2 if leave for a review of the Scheme Resolution is granted by the court, the court has declined
to set aside the Scheme Resolution in accordance with section 115(7) of the Companies Act
and the court has approved the implementation of the Scheme Resolution;
4.3.1.2.5 each of the following regulatory approvals shall have been obtained, either unconditionally
or, to the extent that it is subject to any condition, (i) LGL shall have confirmed in writing that
such condition is acceptable to LGL (and to LHL and SBG to the extent that they are affected
by such condition other than as direct and indirect shareholders of LGL), and LGL shall not
unreasonably withhold or delay such confirmation, and (ii) if such condition requires L2D to
perform a material obligation before the date on which all of the Scheme Conditions have
been fulfilled or, if applicable, waived (“Fulfilment Date”), L2D shall have confirmed in writing
that such condition is acceptable to L2D and L2D shall not unreasonably withhold or delay
such confirmation;
4.3.1.2.5.1 a compliance certificate issued by the TRP in terms of section 121(b) of the Companies Act in
respect of the Scheme;
4.3.1.2.5.2 such approval of FinSurv as is required in terms of the Exchange Control Regulations, 1961 to
implement the Scheme;
4.3.1.2.5.3 such approvals of the Financial Sector Conduct Authority as are required in terms of section
43 of the Collective Investment Schemes Control Act 45 of 2002 to implement the Scheme
and such approvals of the Prudential Authority as are required in terms of sections 50 and 51
of the Insurance Act to implement the Scheme and the Structure Alignment;
4.3.1.2.6 LGL and L2D shall have obtained such written agreements as may be required from banks and
other third parties to contracts with L2D and its subsidiaries in order to permit the
implementation of the Scheme and Structure Alignment without adverse consequences (such
as an event of default or the immediate repayment of debts), and all such agreements shall
be in such forms as LGL may reasonably require; and
4.3.1.3 prior to the time at which all of the other Scheme Conditions (excluding obtaining a compliance
certificate from the TRP as required in terms of paragraph 4.3.1.2.5.1 which will only be obtained
after the Scheme Condition in this paragraph 4.3.1.3 has been fulfilled) have been fulfilled or, if
applicable, waived, the Scheme has not terminated in accordance with paragraph 8.
4.3.2 The Scheme Conditions in paragraphs 4.3.1.1, 4.3.1.2.1, 4.3.1.2.3, 4.3.1.2.4 and 4.3.1.2.5 are
regulatory in nature and cannot be waived. The Scheme Conditions in 4.3.1.2.2 and 4.3.1.2.6 may
be waived by LGL. The Scheme Condition in 4.3.1.3 may be waived by agreement between L2D
and LGL.
4.3.3 LGL and L2D may amend the Long Stop Date and/or the date referred to in paragraph 4.3.1.1 by
written agreement and, if required, with the approval of the TRP. If the Long Stop Date or the
date referred to in paragraph 4.3.1.1 is amended, the amended date will be released on SENS and,
if required, published in the South African press.
5. DISTRIBUTIONS
5.1 The Scheme will provide for L2D to declare and pay to L2D Shareholders distributions (as REIT
distributions of L2D's income) in respect of income accrued in the period commencing on
1 January 2023 and ending on the last day of the month prior to the month in which the Fulfilment
Date occurs (“Distribution Period”), on the basis that, inter alia:
5.1.1 within three months after the expiry of each successive L2D complete six-month financial
reporting period (being any six-month period commencing either 1 January or 1 July) (“Reporting
Period”) that occurs within the Distribution Period, L2D will be able to continue to declare and
pay a distribution (“Ordinary Distribution”) of L2D's income in respect of that Reporting Period in
the ordinary course;
5.1.2 prior to implementing the Transaction and in addition to any Ordinary Distributions, L2D shall,
subject to paragraph 5.1.3, effect a cash distribution (“Clean-Out Distribution”) of distributable
income accrued in respect of the period commencing on the day following the end of the most
recent Reporting Period and ending on the last day of the month preceding the month in which
the Fulfilment Date occurs;
5.1.3 a Clean-Out Distribution shall not be payable if the Fulfilment Date occurs during the month
following the last month of a Reporting Period;
5.1.4 by way of illustrative example, if the Fulfilment Date occurs during November 2023, L2D will pay:
5.1.4.1 an Ordinary Distribution in respect of the Reporting Period ending on 30 June 2023 by no later
than 30 September 2023; and
5.1.4.2 a Clean-Out Distribution in respect of the period commencing on 1 July 2023 and ending on 31
October 2023;
5.1.5 the Clean-Out Distribution will be paid to L2D Shareholders on the date of implementation of the
Scheme ("Implementation Date"), simultaneously with the Scheme Consideration.
5.2 The amount of any Ordinary Distribution or Clean-Out Distribution shall be calculated, inter alia,
by determining the distributable profits of L2D for the period in respect of which the Ordinary
Distribution or Clean-Out Distribution will be declared net of any of L2D's transaction costs and in
accordance with L2D's accounting and financial reporting practices adopted for the year ended
on 31 December 2022.
5.3 The declaration and payment of an Ordinary Distribution or the Clean-Out Distribution in
accordance with the Scheme shall not affect the Scheme Consideration. If, however:
5.3.1 the amount of any such Ordinary Distribution per Share or Clean-Out Distribution per Share is in
excess of the per Share amount calculated in accordance with the Scheme; and/or
5.3.2 L2D declares or pays any other distribution (not being an Ordinary Distribution or a Clean-Out
Distribution) between 31 December 2022 and the Implementation Date,
then the aggregate of all excess amounts referred to in paragraph 5.3.1 and of the per Share
amounts of all other distributions referred to in paragraph 5.3.2 shall be deducted from the
Scheme Consideration. If any such reduction of the Scheme Consideration is required, L2D and
LGL shall as soon as possible publish a SENS announcement informing L2D Shareholders thereof.
6. Employee share scheme
If the Scheme Resolution is adopted, an offer will be made to all of the participants in L2D’s Restricted
Share Plan (“RSP”) to forfeit their awards and rights under the RSP in consideration for replacement
awards and rights (“Replacement Offers”). The Replacement Offers will be conditional on all of the
Scheme Conditions having been fulfilled or, if applicable, waived.
7. Interim period undertakings
L2D has undertaken that it and each of its subsidiaries shall carry on and preserve its business in a
manner consistent with past practice. In addition, L2D has agreed to a number of customary interim
period undertakings for a transaction of this nature which will be more fully set out in the Scheme
Circular.
8. Termination
8.1 The Scheme shall terminate with immediate effect and all rights and obligations of LGL, L2D and
L2D Shareholders in terms of the Scheme shall cease forthwith on written notice of termination
by LGL to L2D, which may be given by LGL only if:
8.1.1 the Independent Board (as defined in paragraph 10), withdraws, modifies or qualifies its opinion
that the Scheme Consideration is fair and reasonable to Scheme Participants or its
recommendation to vote in favour of the Scheme Resolution; or
8.1.2 a Material Adverse Change (as defined in paragraph 8.2) occurs.
8.2 A “Material Adverse Change” means any change, matter, event, occurrence or circumstance, as
a result of which any of the following has occurred or is likely to occur:
8.2.1 the gross asset value of the property portfolio of L2D and its subsidiaries (collectively
“L2D Group”) is reduced to less than 90% of the gross asset value of R8,205,855,000.00 reflected
in L2D's annual financial statements as at and for the year ended on 31 December 2022; or
8.2.2 the income of the L2D Group for any period of twelve consecutive months is reduced to less than
90% of the income of R994,312,000.00 reflected in L2D's annual financial statements as at and for
the year ended on 31 December 2022; or
8.2.3 the net property income of the L2D Group for any period of twelve consecutive months is reduced
to less than 90% of the net property income of R554,077,000.00 reflected in L2D's annual financial
statements as at and for the year ended on 31 December 2022.
9. CONCERT PARTY ARRANGEMENTS AND BENEFICIAL INTERESTS
9.1 LGL confirms that it is the ultimate purchaser of the Shares pursuant to the Scheme. The Excluded
Shareholders may, as related or inter-related companies of LGL, be deemed to be acting in concert
with LGL and will not vote on the Scheme Resolution or be Scheme Participants. However, LGL is
not acting in concert with any other party in relation to the Scheme.
9.2 LGL holds 525,238,956 Shares, representing 57.8% of all issued Shares. Lexshell 615 Investments
Proprietary Limited (“Lexshell”), a wholly owned subsidiary of LHL, owns 6,325,747 Shares,
representing 0.7% of all issued Shares.
9.3 Liberty Holdings Limited, which owns 100% of LGL, holds 25,000 Shares, representing 0.003% of
all issued Shares.
9.4 2DP, which is a wholly-owned subsidiary of L2D and an indirect subsidiary of LGL, holds 22,143,171
Shares, representing 2.44% of all issued Shares.
9.5 None of LGL, LHL, the Excluded Shareholders or Lexshell has had any dealings in Shares during the
six-month period prior to the date of this announcement.
9.6 The Liberty Two Degrees Restricted Share Trust (“Trust”) holds 20,612,817 Shares for the
purposes of the RSP. Pursuant to the provisions of the RSP, the Trust acquired 4,169,820 Shares
on 1 March 2023 at a price of R4.30 per Share. The Trust has not disposed of Shares for its own
account within the six-month period prior to the date of this announcement.
9.7 The Trust will not vote on the Scheme Resolution.
9.8 No beneficial interests in L2D are held or controlled, directly or indirectly, by any LGL directors.
9.9 Neither LGL nor any of its directors have any options to purchase any L2D shares or beneficial
interests therein.
10. INDEPENDENT BOARD, INDEPENDENT EXPERT AND FAIR AND REASONABLE OPINION
10.1 The L2D board of directors has, in accordance with regulation 108 of the Companies Regulations,
2011 (“Companies Regulations”), constituted an independent board comprising Peter Nelson,
Craig Ewin, Nonhlanhla Mayisela, Itumeleng (Tumi) Dlamini, Philisiwe Mthethwa and Lynette Ntuli
(the “Independent Board”) to consider and engage with LGL in relation to the Transaction.
10.2 The Independent Board has appointed Mazars Corporate Finance Proprietary Limited as the
independent expert (“Independent Expert”) to provide it with external advice in relation to the
Scheme, in the form of a fair and reasonable opinion as required by and in compliance with the
Companies Act and the Companies Regulations (“Independent Expert Report”).
10.3 A pre-final draft of the Independent Expert Report (“Pre-Final Independent Expert Report”) has
been delivered to the Independent Board in terms of which the Independent Expert has, on a
preliminary basis, concluded that the terms of the Scheme, including the Scheme Consideration,
are fair and reasonable to L2D Shareholders.
10.4 The Independent Board has, taking into account the Pre-Final Independent Expert Report and on
a preliminary basis, concluded that the terms of the Scheme, including the Scheme Consideration,
are fair and reasonable to L2D Shareholders and as a result, intends to recommend that L2D
Shareholders vote in favour of the Scheme Resolution.
10.5 The final Independent Expert Report and final views and recommendations of the Independent
Board will be included in the Scheme Circular.
11. UNDERTAKINGS AND SHAREHOLDER SUPPORT
LGL has received non-binding letters of support in connection with the Scheme from each of
Coronation Asset Management (Pty) Ltd (“Coronation”) and Sesfikile Capital Proprietary Limited
(“Sesfikile”) confirming their intentions to vote in favour of the Scheme Resolution in respect of the
Shares held by them or as the representative of their clients who hold Shares, but without disclosing
the identities of their clients. Coronation and its clients hold 204 070 426 Shares, constituting
approximately 22.5% of the issued Shares, which equates to approximately 61.1% of the Shares that
may vote on the Scheme Resolution (that is, excluding the Shares held by the Excluded Shareholders)
(“Voting Shares”). Sesfikile and its clients hold 12 135 949 Shares, constituting approximately 1.3%
of the issued Shares, which equates to approximately 3.6% of the Voting Shares.
12. CASH CONFIRMATION
In accordance with Regulation 111(4) and 111(5) of the Companies Regulations, LGL has obtained and
delivered to the TRP an irrevocable unconditional guarantee from The Standard Bank of South Africa
Limited, and the TRP has confirmed that such confirmation of funds is compliant in terms of
regulations 111(4) and 111(5) of the Companies Regulations.
13. DOCUMENTATION
13.1 L2D and LGL will jointly issue the Scheme Circular to L2D Shareholders, containing the terms and
conditions of the Scheme and containing the Independent Expert Report, the opinion and
recommendation of the Independent Board and the pertinent dates relating to the Scheme and
necessary forms to give effect to the Scheme, and together with a notice to convene a general
meeting of L2D Shareholders to consider and, if deemed fit, passing resolutions to approve the
Scheme.
13.2 The Scheme Circular is expected to be distributed on or about 25 August 2023. A further
announcement relating to the distribution of the Scheme Circular, further important details
related to the Scheme and the salient dates and times of the Scheme will be published on SENS
in due course.
14. DELISTING
As soon as possible after the Fulfilment Date L2D shall apply to the JSE for the Delisting to be effected
following implementation of the Scheme in accordance with section 1.17(b) of the JSE Listings
Requirements.
15. RESPONSIBILITY STATEMENTS
15.1 The Independent Board (to the extent that the information relates to L2D) collectively and
individually accept responsibility for the information contained in this announcement and certify
that, to the best of their knowledge and belief, the information contained in this announcement
relating to L2D is true and this announcement does not omit anything that is likely to affect the
importance of such information.
15.2 The board of directors of LGL (to the extent that the information relates to LGL) collectively and
individually accept responsibility for the information contained in this announcement and certify
that to the best of their knowledge and belief, the information contained in this announcement
relating to LGL is true and this announcement does not omit anything that is likely to affect the
importance of such information.
Johannesburg
27 July 2023
Financial adviser and Transaction sponsor to L2D
Rand Merchant Bank (a division of FirstRand Bank Limited)
Legal adviser to L2D
Werksmans Attorneys
Lead financial adviser to LGL
Java Capital
Co-adviser to LGL
Standard Bank
Legal adviser to LGL
Webber Wentzel
Independent Expert
Mazars Corporate Finance Proprietary Limited
L2D Investor Relations
Sumenthree Moodley
Contact number: 011 358 9171
