Will Sandile Nomvete and his team outmanoeuvre Sisa Ngebulana’s Billion Group?
That must be the salacious question in the lips of many observers of the JSE listed property sector which is hosting an interesting battle to the top between two black controlled listed property funds. These are the Nomvete led Delta Property Fund and Rebosis Property Fund an offshoot of the Billion Group.
Delta and Rebosis are locking horns over intentions to merge with another black controlled JSE listed property fund Ascension Properties.
As things stand it would seem the Nomvete corner is winning. Kind off!
Delta announced yesterday that it has concluded agreements to acquire a 17.75% stake in Ascension Properties, and has received letters of support from institutional investors, which together effectively secure Delta a major 41.40% investor voting bloc in Ascension.
Nomvete said “The acquisition provides Delta with a strategic stake in Ascension and supports Delta’s stated objective to ultimately acquire 100% of the issued share capital of Ascension.”
Ngebulana is kind off standing on the way of Nomvete to seal this deal as he wants Ascension for Rebosis. This makes for an interesting battle to the top between the two black controlled funds Rebosis and Delta.
The battle emerged onto the public space on Monday, this week, and has over the past few days escalated into something of a marvel.
Rebosis moved first on Monday by issuing a joint statement with Ascension stating a propos a proposition to merge in what promised to create a combined fund with an asset base of about R8 billion.
On Monday, Rebosis and Ascension announced that they had reached a cooperative agreement to work towards a merger of their portfolios. The two companies did sign a sale agreement, where Ascension Property Management Company would be sold to Rebosis for a consideration of R150m whilst working towards full cooperation or merger.
The two companies, Rebosis and Ascension issued the following rationale: The market conditions in which smaller market capitalisation REITs, struggling to compete for capital, are driven to consolidation and corporate activity in order to best serve the interests of their linked unitholders and tenants. “Ascension and Rebosis share an objective of preserving their black management and ownership credentials in order to continue to be positioned to enhance their offering of office space to government and other empowerment sensitive tenants.”
On Tuesday Delta threw a spanner onto the works. Delta announced that it had been talking to the Ascension stable to acquire the very same Ascension Property Management Company which stands to be sold to Rebosis.
In its announcement Delta essentially advised that it was made to believe it had reached an agreement to engage with Rai exclusively for the acquisition of Ascension Property Management Company.
The company said it entered into an agreement, dated 28 January 2014, with certain of the shareholders of the Ascension Manco to acquire a majority portion of the Manco for a cash consideration of R76.9m. This agreement said Delta valued the Ascension Manco at R105 million.
The Delta statement also noted the Rebosis/Ascension Monday announcement. “Delta hereby wishes to draw the attention of Delta Linked Unitholders to the fact that Shaun Rai and his affiliates, who collectively own 73.28% of the issued share capital of the Ascension Manco, have undertaken in terms of the Agreement not to negotiate, discuss, dispose of, transfer or encumber their shareholding in Ascension until 7 February 2014.”
Delta also noted that its agreement entitles it to receive “a break fee of R10 million should Shaun Rai and his affiliates elect not to enter into the sale…”
Delta added that it “has received legal advice which states that the Agreement is valid and enforceable against Shaun Rai and his affiliates as signatories to the Agreement. Furthermore, the Break Fee will be due and payable to Delta should Shaun Rai not conclude the Sale…”
Delta is considering their options in regard to their legal position and will update Delta Linked Unitholders in due course.” Yesterday’s announcement by Delta changes the complexion of the battle. Delta said it has received letters of support from certain institutional investors, who hold some 23.65% in aggregate of the total number of Ascension linked units in issue. These have committed to support Delta ambition to take over Ascension.
Nomvete said “While this isn’t the straightforward transaction that Delta had initially anticipated by having Ascension Property Management Company as a conduit, we are confident that consolidation remains beneficial for Delta’s linked unitholders and an appealing opportunity for Ascension’s linked unitholders.”
Delta said there are excellent synergies between its portfolio and that of Ascension. “Both have excellent BEE credentials and both are chiefly invested in office buildings with long-term government leases in key economic locations.”
Delta is in an excellent position, with a strong management team, to take Ascension’s assets forward.”
Nomvete added that while Delta sees the Ascension Manco as an unrelated transaction, it is considering its legal position with regards the concurrent sale of the Ascension’s Manco to Rebosis Property Fund.
“Our acquisition of the Ascension linked units will be yield enhancing for investors and is an important step in securing the full capital of Ascension. It supports Delta’s growth strategy,” said Nomvete.
Will Ngebulana be the first to blink?
Rebosis issued an announcement today saying it holds 29.05% of Ascension’s issued B linked units.