Long overdue – the words used by analysts to describe Rebosis Property Fund’s (Rebosis) move to acquire Ascension Properties, which sent the company’s shares down by 2%.
On Tuesday, Rebosis announced that it would acquire 100% of Ascension, making a bid for the company’s entire A- and B-linked units it does not already own.
“This has always been Rebosis’ intention so it’s no surprise. The market has been waiting for an announcement,” says Evan Robins, listed property manager for Old Mutual Investment Group’s MacroSolutions boutique.
If the acquisition is successful upon approval from shareholders and the Competition Commission, Rebosis will have a property portfolio in excess of R11 billion and a market capitalisation of just under R8 billion (currently R5.5 billion).
CEO of Rebosis Sisa Ngebulana says if the transaction is approved, Ascension will be incorporated into Rebosis. There is no indication if Ascension will still be a listed entity.
Rebosis already owns a 32% stake in Ascension and its management company.
The transaction would also give Rebosis more exposure to Ascension’s portfolio of 28 properties of largely government tenanted offices located in Cape Town and Johannesburg valued at R3.7 billion.
Rebosis’ current portfolio has 19 properties, of which 14 are office buildings located in nodes attractive to government tenants and the rest are retail assets.
“A big portion of Ascension’s government assets are in the Western Cape. We always wanted the Western Cape to be part of our geography. Office nodes are taking strain, but government nodes are differentiated from general office nodes,” Ngebulana says.
Shareholders of Ascension B-linked units would receive 23.549 Rebosis ordinary shares for every 100 Ascension B-linked units held for the transaction.
Rebosis has created an A-linked unit structure for Ascension A-linked shareholders. Ascension A-linked shareholders would receive 19.34236 Rebosis A-linked ordinary shares for every 100 Ascension A-linked units held.
Forming the A-unit structure with shareholders, the JSE and Financial Services Board delayed Rebosis’ takeover of Ascension, says Ngebulana.
Sesfikile Capital director Mohamed Kalla says the creation of Rebosis A-unit structure is disappointing, as he would prefer the property counter to conclude the transaction by issuing ordinary shares.
“Having the A-unit makes things messy as it will be quite an illiquid unit in addition to detracting from Rebosis’ ordinary shares and overall market capitalisation,” Kalla told Moneyweb.
The latest announcement follows Rebosis and Delta Property Fund (Delta) both bidding for Ascension – each property counter believed its negotiations were exclusive.
A three-way merger between Delta, Rebosis and Ascension was proposed but subsequently collapsed in 2014. Delta reverted to selling its holding in Ascension to Rebosis, boosting its stake from 16% to 32%.
The merger between the property counters would create a sizable black-managed property portfolio and join the ranks of listed property companies on the JSE.
Commentators say Rebosis’ acquisition of Ascension’s management company made the takeover by Rebosis inevitable. Since the acquisition of the management company, Ngebulana says Rebosis has been “hands-on in the management of the Ascension portfolio.”
“It [the acquisition of the management company] has made a great improvement to Ascension’s bottom line and we are excited about the continued value unlock in this regard,” says Ngebulana.
Ascension did not respond to Moneyweb’s enquiries.