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Redefine Properties strikes in ‘friendly’ bid for rest of The Pivotal Fund


REDEFINE Properties (JSE: RDF) confirmed Tuesday that it will buy The Pivotal Fund (JSE: PIV) in a share swap deal valued at about 6 billion rand ($425 million).

Shareholders in Pivotal will get from Redefine 460 million new Redefine Properties shares plus 31 million shares in Echo Polska Properties (EPP), the companies said in a joint statement.

Pivotal dropped 4.2 percent by 3:51 p.m. in Johannesburg.

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The Redefine shares will be issued ex-dividend, anticipated to be at the end of November 2016 and the EPP share will be delivered during January 2017. Redefine Properties’ strategic investment in EPP will remain intact. 

The deal, which is subject to the usual regulatory processes for a transaction of this nature, will be implemented through a scheme of arrangement which requires 75% approval at a general meeting of Pivotal shareholders.

Pivotal’s largest shareholders, representing about 25.2% of the voting power, have already supported the deal.

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“We subsequently came to a juncture where we had to weigh up the benefits of becoming a smaller-cap Real Estate Investment Trust (Reit) in a highly congested sector, or merge with one of the largest Reits in the JSE’s listed property index,” says Pivotal’s CEO Jackie van Niekerk.

Once the deal has been concluded which is expected before the end of the year, Pivotal will be delisted from the JSE.

Andrew Konig, CEO, Redefine Properties says, “An irrevocable buy-in from a significant number of Pivotal shareholders has been received. Our intention is not to be a shareholder as we can only achieve the full potential for synergies with complete ownership.”

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“Development funds like Pivotal are seeing twin challenges of increasing cost of capital as well as the macro environment putting pressure on development returns,” adds Konig.

Redefine has a market capitalisation of R58.7bn, making it the second-largest SA-based property company in SA, while Pivotal’s market capitalisation is R6bn.

Pivotal’s property portfolio is valued at R12.9 billion comprising 8 retail properties, 10 offices and 3 industrial sites, a number of development properties with 4 active developments. Pivotal’s African assets in markets like Mauritius, Mozambique, Nigeria, Morocco, Kenya and Zambia will be sold post implementation.

The acquisition will add property worth R13 billion to Redefine’s portfolio, expanding its premium office space offering and giving the company a total of 350 properties covering 5.7 million square metres.

In Sandton, Redefine will add crown jewels like Alice Lane with tenants like Sanlam, Santam, Standard Bank, and Virgin Active South Africa. Part of the development at Alice Lane also includes an office building likely for completion during April 2017 to house legal heavy weight Bowman Gilfillan.

Besides this acquisition, Redefine broadened its offshore footprint earlier in the year via a €260 million equity investment into EPP which has a €1.2 billion commercial platform comprising 18 properties in the Polish market. 

EPP plans to broaden its shareholder base by listing on the JSE during the first half of September this year.

The deal follows Arrowhead Properties’ failed bid of its peer Emira Property Fund in July after the company snubbed the deal for its low price and scant synergies between both funds.