Within a month of announcing its interest in securing a stake in Arrowhead Properties, Cape Town- based Fairvest Property Holdings confirmed on Tuesday that it has concluded agreements with shareholders of Arrowhead to acquire 50.1% of the fellow JSE-listed property counter’s B shares.
The deal is being done as a share swap arrangement through the issue of new Fairvest shares at a swap ratio of 1.85 Fairvest shares per Arrowhead B-share.
“In addition, Fairvest has already received undertakings of support from 63.7% of its own shareholders to vote in favour of the resolutions required to implement the swap agreements,” it noted in a statement.
Fairvest first announced on April 29 that it was interested in acquiring a stake in Arrowhead via privately placed share swap transactions following several separate approaches from Arrowhead shareholders.
“We have had very positive engagements with both Arrowhead and Fairvest shareholders,” Fairvest CEO Darren Wilder, said on Tuesday following the group’s announcement of the deal.
“[This is] demonstrated by the level of support already achieved for this exciting opportunity to unlock sustainable value over time with the aim of creating a more liquid and well-rated Reit [real estate investment trust] of scale,” he added.
In a brief statement to Moneyweb, Arrowhead’s CEO Mark Kaplan said: “We have noted the contents of the Fairvest announcement. As previously indicated, we are always open to considering proposals that may unlock value for Arrowhead shareholders.”
Kaplan added that the group is in the the process of considering the implications of the announcement and would be in a position to respond more fully at a later stage.
Arrowhead’s B-share closed 10% up on the back of the news on Tuesday. Fairvest’s share price was just over 2% down.
“It is Fairvest’s view that investors generally favour larger Reits in which their investment is liquid and have confidence in Fairvest’s ability to unlock value both operationally and through capital allocation within its traditional low-income retail focus as well as from other sub-classes of investment property,” the better performing fund notes in its Sens statement on the share swap deal.
Fairvest has secured the support of most of Arrowhead’s biggest and smaller shareholders of the B-share, including:
- 36ONE Asset Management – 13.8%
- Vukile Property Fund – 11.3%
- Catalyst Fund Managers – 8.9%
- Visio Fund Management – 8.6%
- Ninety One SA – 3%
- Counterpoint Asset Management – 1.7%
- Catalyst Fund Managers Alternative Investments – 1.4%
- Bridge Fund Managers – 1%
Fairvest, however, says that the transactions are subject to the fulfilment of various conditions including regulatory and shareholder approvals. A circular containing the details of the transactions will be sent to Fairvest shareholders in due course.
“We also continue to engage with the Arrowhead team as we believe that Fairvest’s operational and capital allocation track record can add value within our traditional low-income retail focus as well as other sub-classes of investment property,” Wilder notes.
As part of the swap transactions, Fairvest has also proposed that its shareholders approve the internalisation of its asset management function to drive value-adding cost efficiencies internally and through M&A activity.
“A board committee of independent non-executive directors is finalising the details of what will be proposed to Fairvest shareholders in this regard,” the group says.