Black property fund managers in a merger tiff

The Black Economic Empowerment (BEE) agenda on the JSE listed property sector has been thrown onto a ‘complex avenue’ with three black managed entities; Rebosis, Delta and Ascension entering a merger tiff.

It would seem Sisa Ngebulana’s Rebosis Property Fund moved first with a proposition to merge with Shaun Rai’s Ascension Properties in what promises to create a combined fund with an asset base of about R8 billion. But then it would seem Sandile Nomvete’s Delta Property Fund has also been courting Ascension. Hence the two curious announcements which hit the JSE listed property sector this week.

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 also noted on Monday that “In discussions between them, Ascension and Rebosis have noted:

  • 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; and
  • 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 It announced that it had been talking to Rai and affiliates 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 and affiliates 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.”

This tiff can perhaps be read as a rush by the black management funds on the JSE to bulk up their space and move away from being potential takeover targets. Certainly and where Rebosis is concerned there have been unsubstantiated rumours that the big boys are sniffing around to gain Rebosis’ retail assets.

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