Fountainhead, Redefine merger back on the table

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Johannesburg - A potential merger between listed property companies Redefine and Fountainhead is back on the negotiating table.

Fountainhead yesterday advised its unitholders that the two firms had begun discussing the terms of a possible merger.

“The engagements are still at an early stage but an independent committee of the board of Fountainhead Manco [management company] has been established to progress discussions and to represent the interests of all Fountainhead unitholders,” it said.

Listed Growthpoint and Redefine were until early last year involved in a bitter battle for Fountainhead’s assets, largely because Growthpoint had made an offer for Fountainhead that excluded its management company. Redefine paid Standard Bank Properties and Liberty Holdings R660 million in 2012 to acquire Fountainhead’s management company and warned of litigation if its assets were sold and it did not receive any compensation for the acquisition costs of the management company.

Redefine countered the threat of Growthpoint acquiring Fountainhead’s assets without it receiving compensation for its acquisition of Fountainhead’s management company by investing R4.8 billion to build up a 45.6 percent shareholding in Fountainhead.

It regarded this shareholding as a blocking vote to any attempt by Growthpoint to acquire these assets.

This led to Growthpoint withdrawing its offer last May to acquire Fountainhead but initially indicated it had not given up its fight.

Growthpoint’s chief executive Norbert Sasse confirmed in August “the book is closed and it has already called it a day” in its bid to acquire Fountainhead.

Redefine disclosed in October that it had increased its shareholding in Fountainhead to 49.6 percent when it announced a proposal to acquire up to 250 million more units in exchange for units it held in listed retail fund Hyprop.

Marc Wainer, Redefine’s chief executive, confirmed at the time it was Redefine’s ultimate objective to have 100 percent of Fountainhead’s assets on its balance sheet, but did not have any timescale in which it was seeking to achieve this.

The Hyprop share exchange offer resulted in Redefine increasing its shareholding in Fountainhead to 61.7 percent.

Fountainhead, which has a diversified property portfolio valued at R11.8bn, yesterday reported an 11 percent growth in its interim dividend to 29c for the six months to February, from 26.11c in the previous corresponding period. It also revised upwards its dividend forecast for its full year.

Len van Niekerk, Fountainhead’s chief executive, said it was anticipating distribution growth of between 7 percent and 8 percent for the full year compared to its previous guidance of 6.25 percent to 7.25 percent. He added that Redefine had increased its holding in Fountainhead to 65.9 percent in the reporting period.

He said Fountainhead’s core portfolio delivered net property income growth of 7.3 percent during the review period despite challenging market conditions. Total vacancies grew from 7.1 percent to 9.1 percent during the period. More than R1bn in capital projects were approved to improve the quality of the portfolio.

Van Niekerk said the majority of the approved projects would begin from this month and expected to be completed in the later part of next year.

Fountainhead concluded agreements to dispose of its minority interests in Westgate, Southgate and the Southgate Value Market for a total consideration of R944m. The proceeds will be used to fund capital projects and acquisitions.

Redefine shares rose 1 percent to close at R10.08 yesterday; Growthpoint shares climbed 1.43 percent to close at R24.90. - Business Report


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