Rebosis and Delta halt Merger talks, market reacts

Delta’s Sandile Nomvete and Rebosis’s Sisa Ngebulana have mutually agreed to terminate merger discussions.

Delta Property Fund [JSE: DLT] and Rebosis Property Fund [JSE: REA], upon constructive analysis with stakeholders, have mutually agreed to terminate merger discussions.

The two majority black-owned companies, Delta Property Fund and Rebosis Property Fund were considering joining forces to create a property fund with R29 billion in assets.

The news comes at a time when both companies have seen sharp declines in their share prices over the past two years, with SA’s economic slowdown taking its toll on commercial property and mall owners.

No reasons were given for the decision not to pursue the merger, but the market welcomed the move on Delta's behalf. Its share price rocketed by 43% to 60c in the morning, on track for its best one-day performance since it listed in 2012. It has, however, lost 90% of its value over the past 24 months.

Rebosis was unchanged at 32c, having fallen 96.56% over the past two years.

The merger, would help the two landlords to scale up and weather the tough trading environment, they said in a joint announcement August last year.

The two funds each own a range of office buildings, and both are landlords to many government entities. A merged entity would be able to benefit from synergies across these assets. Rebosis also owns shopping centres in Port Elizabeth (Baywest Mall), East London (Hemingways Mall) and Centurion (Forest Hill City).

The office property market is currently weathering a very difficult time, with almost 20% of the office space in the Durban CBD, Rosebank and Hatfield in Tshwane standing empty in the last quarter of 2019, according to new report by the South African Property Owners’ Association (Sapoa). Vacancy rates in Sandton, Sunninghill, Illovo and Midrand remain close to multi-year highs.

Delta has been through a drawn-out process of getting its state tenants, especially local government ones, to agree to new leases.

Last month, in an unprecedented move in the listed real estate sector, 80% of Rebosis Property Fund’s ordinary shareholders voted against implementing the company’s remuneration policy.

The company has been through a turbulent two years in which it wrote off its investment in UK mall owner New Frontier Properties, having lost more than R2bn of its value, and has had to sell offices and malls in SA to handle its escalating debt levels.