It has been one hell of a long week for watchers of JSE listed property funds, and in particular three black controlled stocks Delta, Rebosis and Ascension.
Earlier in the week the Sisa Ngebulana led Rebosis Property Fund appeared to squaring up against the Sandile Nomvete led Delta Property Fund. Ascension Property Fund was positioned as a trophy as the two groups made known their acquisitive intentions. Daggers were drawn.
Today (Friday) a new possibility entered the scene after an announcement which said that “Delta and Rebosis are in discussions regarding their respective strategies and unitholder interests generally and with regard to Ascension.” The announcement added that “unitholders are advised to exercise caution in dealing in their linked units.”
It is not clear whether this is a new cautionary or an extension of old cautionary announcements which saw Delta and Rebosis square up.
It all started, at least for the public eyes, with a Rebosis announcement on Monday. Ngebulana’s fund announced that it had had reached a cooperative agreement with Ascension Properties for the two groups to work towards merging 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 justification was that the market conditions in which smaller market capitalisation property funds are struggling to compete for capital and must look at consolidation 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.”
A merger between Rebosis and Ascension would create a property fund with an asset base valued around the R8bn mark. This is a conclusion coming out of the latest figures of the two companies.
It emerged on Tuesday that Delta was singing the same tune. It appears as if Delta was given an impression of cooperation by Ascension controllers and mainly Shaun Rai and associates. Delta released on Tuesday a statement saying it had been talking to the Ascension stable to acquire the very same Ascension Property Management Company which stands to be sold to Rebosis.
Delta added that it had 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.
It beats the mind how Rebosis came to agree to pay R150m for the same asset. R150m is too high a rpice when someone else is prepared to only pay R105m. Or was it?
The Delta statement also noted Rebosis/Ascension Monday announcement. It also noted that Rai and associates had undertaken “not to negotiate, discuss, dispose of, transfer or encumber their shareholding in Ascension until 7 February 2014.”
Delta further noted on Tuesday that it has noted the Rebosis/Ascension Manco agreement and legal advice had suggested that the Rebosis/Ascension Manco agreement appears to be valid. It also noted that in its agreement with Rai and affiliates it was entitled to receive “a break fee of R10 million should Shaun Rai and his affiliates elect not to enter into another agreement before expiry of the Delta agreement. Delta added that it was taking legal advice on the matter.
On Wednesday, Delta showed it hand by announcing that it had gathered a 17.75% stake in Ascension Properties. Delta added that it has received letters of support from institutional investors, which together effectively secure Delta a major 41.40% investor voting bloc in Ascension.
Nomvete was quoted saying “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.”
On Thursday Rebosis followed up saying it has acquired 29.05% share in Ascension Properties’ B linked units. At this point it appeared as if the Ascension/Rebosis/Delta situation was set for war. But then Friday’s statement, announcing talks between Rebosis and Delta as quoted, opens up the possibilities.