Johannesburg - Redefine's plans to take over listed retail property fund Hyprop gathered further momentum on Wednesday.
But analysts doubt whether the company will manage to get all the Hyprop units that it does not already own - especially at the R50/unit price being offered by Redefine.
Analysts believe Hyprop is worth more, based on their estimate of the value in the portfolio that can be unlocked. Hyprop owns a quality retail property portfolio with prime assets such as Canal Walk in Cape Town, the Hyde Park Shopping Centre and the Rosebank Mall.
Catalyst investment analyst Paul Duncan says the company representing unit holders, which owns about 5% of Hyprop's units, won't sell for R50/unit. According to Catalyst's calculations, Hyprop is worth significantly more.
On Wednesday Redefine announced that it had entered into an agreement with Coronation Asset Management to buy an additional 19.7m Hyprop units for about R984m, thus increasing its stake from 33.3% to 45.2% - worth R3.751bn at current pricing.
In terms of this acquisition, which is subject to the approval of the competition authorities, Redefine has to make a compulsory offer to the remaining Hyprop unit holders at R50/unit.
Marc Wainer, joint chief executive of Redefine, says the acquisition represents an opportunity for Redefine to significantly raise its shareholding in Hyprop. He says that this, together with the compulsory offer, would put Redefine in a position to take control of Hyprop.
But Duncan reckons that some of Hyprop's unit holders will probably prefer Redefine to have less control over the Hyprop assets.
He says there are two important perspectives involved. From the Hyprop unit holders' perspective, investors must be able to decide whether they want exposure to a diversified property portfolio such as Redefine, or exposure to a quality retail property fund.
He says no matter how one looks at it, the deal will prove dilutive for Redefine unit holders.
Evan Jankelowitz, co-head of Stanlib's property funds, says Stanlib will not accede to the short-term price. He explains that Stanlib's long-term strategy is that more value can be unlocked if Hyprop remains an independent retail property fund.
Wainer says the acquisition will have a positive impact on Redefine, especially in the light of the improvement in the portfolio's overall quality.
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