Redefine Properties tables new offer to acquire Fountainhead assets
“Following our initial offer, we have engaged with Fountainhead’s institutional investors and their Independent Board. Based on their feedback, we decided to improve our offer through an increased mix of Hyprop units, which enabled us to increase the cons
South Africa’s second largest property company, Redefine Properties today announced that it had increased its offer to acquire property assets for Fountainhead Property Trust's R10,3 billion portfolio.
Redefine Properties offered 56 of its shares and 4.5 Hyprop Investments Ltd (HYP) shares for every 100 Fountainhead units, the bidder said in a statement yesterday. Redefine owns 11% of Hyprop.
“Following our initial offer, we have engaged with Fountainhead’s institutional investors and their Independent Board. Based on their feedback, we decided to improve our offer through an increased mix of Hyprop units, which enabled us to increase the consideration,” Andrew Konig, Financial Director at Redefine told SA Commercial Prop News.
The amended proposal is approximately 6 percent higher than the original proposal and contains a higher proportion of Hyprop units.
In terms of the amended proposal, Redefine will acquire all of Fountainhead’s properties other than Orion Place, Gail Industrial Park and Precision House for a purchase consideration that will result in Fountainhead unitholders receiving 4.5 Hyprop units and 56 Redefine units for every 100 Fountainhead units owned by them.
Redefine also pointed to potential scope to minimize any dilution by reducing interest rates on Fountainhead’s existing interest bearing debt and synergies from managing an enlarged property portfolio.
Fountainhead’s Independent Committee has undertaken to engage exclusively with Redefine in relation to the proposed acquisition on the basis that it will not entertain discussions, negotiate or conclude any agreement with any other party relating to the sale of Fountainhead’s assets until the conclusion of the formal agreements. This undertaking will expire on 31 January 2013. The terms and conditions of the formal agreements remain unchanged and are conditional on the conclusion of formal agreements, regulatory approvals and the requisite approval of Redefine and Fountainhead unitholders.
In addition Fountainhead unitholders who vote in favour of the resolutions required to implement the proposed transaction will have an option to dispose of all or some of their Fountainhead units directly to Redefine for the same number of consideration units, if the proposed transaction is not implemented.
Fountainhead would remain listed on the Johannesburg Stock Exchange after the takeover “to seed a new portfolio” of properties that will conform to the government’s policy of black ownership, Redefine said. Fountainhead, Hyprop and Redefine own shopping centers and office parks in South Africa.
“Our offer represents a full price for the Fountainhead portfolio and is at a 23% premium to net asset value. We believe that the transformative benefits of the proposed transaction such as the size, location and exceptional quality of Fountainhead’s portfolio will far outweigh any potential short-term dilution that may result from the increased offer,” said Konig.
Earlier this year Redefine bought Fountainhead's management company from Standard Bank and Liberty for R660 million, paving the way to make a bid for Fountainhead's portfolio.
Redefine made an indicative offer for Fountainhead's assets on September 28, 2012. Three weeks later, Growthpoint Properties announced a surprise counterbid.
Growthpoint bid offer, 35 of its units for every 100 Fountainhead units held, prompted Fountainhead Property Trust to appoint an independent committee to evaluate the bids lodged by the listed property giants for its portfolio.
Listed property stakeholders have kept a close watch on the outcome of competing bids for Fountainhead Property Trust's R10,3 billon portfolio by sector rivals Growthpoint Properties and Redefine Properties.
The amended proposal also addresses concerns raised by some investors about the potential lack of alignment of interests should the transaction not be implemented by providing an option to those investors who support the proposal to dispose of the Fountainhead units for the same consideration.
Konig commented “It has always been our intention to acquire a significant interest in Fountainhead if the transaction is not implemented so that we can enjoy the full benefit of the value unlocked through focused management of the Fountainhead portfolio. This option, which we believe would result in a considerable direct holding in Fountainhead, is consistent with our intention and further aligns interests between Redefine and Fountainhead unitholders.”
Redefine is listed in the Financial Services - Real Estate sector of the Johannesburg Stock Exchange (JSE) and has a market capitalisation in excess of R26 billion, while Growthpoint is the largest property company with a market capitalisation of R44 billion.
