Johannesburg - JSE-listed property company Redefine Income Fund (RDF) on Thursday announced its intention to purchase
ApexHi Properties and Madison Property Fund Managers in a landmark R12.3bn transaction for SA's listed property sector.
Redefine has informed ApexHi and Madison of its firm intention and the boards of all three companies strongly support the initiative.
If successful in its friendly bid, Redefine will become one of the top two largest listed property companies in SA, with an estimated market capitalisation of at least R19bn and a skilled, experienced internal management team drawn from the three companies.
The offers to ApexHi and Madison will be made pursuant to schemes of arrangement, on the basis of an all-unit consideration and are indivisible, with the objective of Redefine acquiring all of the issued units of ApexHi and Madison in order to effect a merger of the three companies.
ApexHi and Madison linked unitholders will exchange their linked units for Redefine linked units at a swap ratio of 202 Redefine units for every 100 ApexHi A units, 246,8 Redefine units for every 100 ApexHi B units, 104 Redefine units for every 100 ApexHi C units and 90 Redefine units for every
100 Madison units.
Redefine is prepared to effect a partial merger providing it acquires more than 50% of each of the ApexHi A, B and C units and 100% of the units in Madison.
Brian Azizollahoff, CEO of Redefine Income Fund, notes that the timing and pricing now makes it opportune for Redefine to be the acquirer of ApexHi and Madison to create a dominant, internally managed property company for the benefit of the unit holders in all three companies.
Benefits for Redefine unitholders include increased earnings of approximately 10%, exceptional critical mass, continuation of excellent management within an internationally preferred internal model, higher levels of attractiveness to a wider group of investors such as tracker funds and international investors, greater access to capital market funding at
competitive rates, immediate cost savings and higher levels of competitive advantage.
The new Redefine will also be ideally positioned for the introduction of the REIT legislation in SA. Redefine will initially retain its strategic investments in Hyprop and CIREF and will dispose of its other listed holdings.
The benefits of this transaction will also flow through to the linked unitholders of ApexHi and Madison. Independent advisors will be appointed to provide the boards with external advice in line with the Securities Regulation Panel Code.
Gerald Leissner, CEO of ApexHi, points out that "ApexHi unitholders can expect a substantial capital up-lift with a marginal decrease in distributions which makes this an excellent transaction for all parties".
He adds that there are natural synergies between the three companies and that the depth of intellectual capital that comes with the internalisation of Madison will benefit unitholders.
David Rice, MD of ApexHi, comments: "The merged company will have a substantial property portfolio with upside potential. The top 40 properties will account for 41% of total value and 32% of total GLA with a balanced mix of retail, office and industrial properties spread across SA and average rentals which are well below market".
It is possible that there will be an increase in the new Redefine unit price based on increased earnings and particularly the anticipated rerating of the unit due to size and liquidity.
A lower yield would make further revenue enhancing acquisitions easier to achieve. The market capitalisation
of the new Redefine, at the current forward yield of 10%, is anticipated to be at least R19bn which, by size and resulting liquidity, could result in its inclusion in a number of stock exchange and property indices.
Marc Wainer, executive director of Madison, points to the recent experience of SA's largest listed property company which re-rated substantially after inclusion in various indices.
"Madison will become part of a much larger fund with the possibility of a re-rating which will benefit Madison unitholders, as will the conversion of its contractual fee income into sustainable asset-backed income. The merged entity will be ideally positioned to take advantage of opportunities which may arise in the local and international market," says Wainer.
The effective date of the acquisition of Madison and ApexHi linked units by Redefine will be 1 June 2009.
A number of conditions precedent for the merger include the approval of Redefine's unitholders and debenture trustee as well as statutory approvals including the approval of the JSE Limited and the Securities Regulation Panel, the Competition authorities and the Registrar of Companies in terms
of the Act.
An acquisition circular will be provided to Redefine unitholders and circulars will be posted to Madison and ApexHi unitholders.
- I-Net Bridge