The proposed merger between listed property companies Redefine Properties and Fountainhead Property Trust is off – for now.
This follows Redefine, which owns 66 percent of the Fountainhead units in issue, failing at a general meeting on Friday to get the required 75 percent minimum support for the transaction from unitholders who own the remaining 34 percent of the trust’s units not owned by Redefine.
The resolution to implement the transaction was supported by almost 72 percent of Fountainhead unitholders present or represented by proxy at the general meeting.
This means the proposed transaction and subsequent winding up and delisting of Fountainhead will not be implemented.
Redefine’s latest setback follows the difficulties it experienced in 2012 and last year when it was involved in a hostile battle with listed Growthpoint Properties to acquire the assets of Fountainhead.
Growthpoint confirmed in August last year that it had given up on acquiring Fountainhead after earlier withdrawing its offer for the trust.
Redefine confirmed in October last year that it ultimately aimed to own all of Fountainhead’s assets but did not have any timescale in which it was seeking to achieve this.
Redefine and Fountainhead announced last month that they had entered into an agreement, together with Fountainhead Property Trust Managers, in terms of which Fountainhead had agreed to dispose of all its assets, including the entire Fountainhead property portfolio, in exchange for 82 Redefine shares for every 100 Fountainhead units in issue.
The implementation of this agreement was subject to the fulfilment of various conditions, including the approval of Fountainhead unitholders.
Marc Wainer, the executive chairman of Redefine, said on Friday that he was disappointed but not surprised the resolution had not received the required support. The companies had been aware a few Fountainhead unitholders did not support the offer and there was a good chance the resolution would not be passed.
Some Fountainhead units had also been sold for more than the proposed swop rate, which did not make sense, he said.
Votes were cast by unitholders owning about 230 million of the 400 million units eligible to vote.
“Some institutions were holding out for a higher swop ratio of 94 Redefine shares for every 100 Fountainhead units. But the offer at a ratio of 82 Redefine shares for every 100 Fountainhead units was already dilutionary to Redefine and there is no way we would pay that price.
“There’s a little bit of blackmail in it but everybody is entitled to vote their shares how they want but the 75 percent rule means that other shareholders were prejudiced,” he said.
Wainer said the proposed transaction made 100 percent sense in terms of the synergies between Redefine and Fountainhead but not at the swop ratio some Fountainhead unitholders were demanding.
However, at some point in the future it might make sense and Redefine might look at it again, he said.
Wainer said the failure of the resolution to receive the required support meant Fountainhead would have to absorb the R7.3 million costs associated with the proposed transaction, which would reduce the distribution to Fountainhead shareholders by about 0.7c a unit.
Redefine would have had to pick up the cost if the resolution was carried, he said.
Wainer said that without the offer underpin, the price of Fountainhead units might come off from the current range of between R7.80 and R7.90 a unit.
Redefine’s unit price rose 0.41 percent to R9.69 on Friday, while Fountainhead units slid 1.39 percent to R7.80.