LibInt offer: SA disadvantaged

Johannesburg - UK shopping centre owner Liberty International has garnered strong support for its book-building but SA shareholders, who hold around 35% of Liberty International stock, have been disadvantaged by the share placement exercise.

The dual-listed property company, founded by SA insurance tycoon Donald Gordon in the early eighties, announced on Tuesday evening that it managed to raise £620m (R8.1bn) on Tuesday by placing 200 million new shares at an issue price of 310 pence/share.

The latter represents a discount of 21.9% to trading levels on the London Stock Exchange at the time when the issue price was decided on Tuesday. Management hoped to raise between £500m (R5.5bn) and £600m (R7.8bn).

While the Gordon family have indicated that they would take up some £40m (R520m) worth of new stock (12.9 million shares), many other SA shareholders will be left out in the cold, as locals have to use offshore funds to participate in the share placement.

Leon Allison, a property analyst at Macquarie First South Securities, says although SA shareholders have the right to bid for new shares, they have been prejudiced, as many may already have used their offshore allowance in full.

South African shareholders who cannot participate in the share placing will see a marked dilution in their shareholding, as the 200 million new shares represent an increase of around 55% in Liberty International's existing share capital.

Such a strong dilution may well prompt more local investors to bail out of Liberty International. Said Allison: "One could see a lower allocation to Liberty International in future, if it has not happened already."

Paul Hansen of Stanlib agreed that SA shareholders will not all be in a position to benefit from Liberty International's share placing, as management needed to raise cash in Sterling.

However, Hansen said a successful capital raising will be good for all shareholders in the longer term, as it will strengthen the company's financial position and allow it to continue operating as a going concern.

This week's capital-raising exercise by Liberty International follows that of a number of other UK property companies who have in recent months been forced to pay back debt and restore balance sheets on the back of a massive tumble in property values.

A circular will be sent to all Liberty International shareholders at the end of April with details on how they can participate in the share offer. Listing of the new shares is expected to take place on the JSE on May 28. Investors will have until May 21 to subscribe to the offer. Qualifying shareholders will have the opportunity to apply for 2.601980 open offer shares for every 10 existing shares at 310 pence/share.

Liberty International's share price was trading at around 5 400c earlier on Wednesday, some 63% down from its 12-month high of R147.

- Fin24.com