What started like a fight for Ascension between black controlled JSE listed property funds has turned out into a three way merger proposal that could create a gigantic property fund with assets valued around R16.5 billion.
An announcement released on the JSE today said Ascension Properties, Rebosis Property Fund and Delta Property Fund are working towards a merger. The announcement raises the black economic empowerment (BEE) movement shaping up inside the listed property sector of the JSE. It brings together a group of formidable black entrepreneurs as led by Rebosis’ Sisa Ngebulana, Delta’s Sandile Nomvete and Shaun Rai’s Ascension.
If the proposal goes through it will also the change the game in the massive public sector property leasing market as all three players are positioned for this lucrative market.
It has to be said that the proposal is still at early stages and has to go through a maze of interests linked to the three different parties. These will include bankers and the apparent backers and sponsors of each party.
The announcement said “The Parties have concluded a written co-operation agreement in terms of which each party undertakes to the other a duty of utmost good faith in co-operating to explore a tripartite merger.”
The announced pronounced the rationale for the merger as such: Capital available to smaller market capitalisation REITs is increasingly constrained, driving consolidation and corporate activity in order to best serve the interests of the REITs linked unitholders and tenants.”
The values of the property portfolio and market capitalisation of the merged entity are anticipated to be in excess of R16.5 billion and R9.5 billion, respectively. Accordingly the Proposed Merger will establish the largest listed black economic empowerment property fund on the JSE.
The parties added that “The growth aspirations of each of the Parties will be fast tracked as strategic platforms are consolidated.
The merged entity is expected to attract interest from a wider group of investors thereby increasing the liquidity of the merged entity and may accordingly result in a re-rating of the merged entity.
The Proposed Merger is expected to position the merged entity to make further yield enhancing acquisitions and its increased size should provide the merged entity with greater access to debt and capital markets at competitive rates and generally to have a lower cost base, thereby improving the prospects of the merged entity.
The announcement added that the swap ratio and legal structure of the Proposed Merger will be determined and agreed by the respective independent boards of the Parties after the the satisfactory conclusion by each of the Parties of a due diligence investigation.
There will also be an independent valuation of each of the Parties’ property portfolios which will be in due course.
The parties are in a process to finalise the proposed board of the merged entity.