DIPULA Income Fund, the diversified real estate investment trust (Reit) said on Friday it was considering a strategic partnership with Resilient Reit in a R1 billion transaction.
The aim would be for Dipula, which has a R9.3bn portfolio of some 191 properties, to optimise its capital structure and benefit from Resilient’s retail property and deal-making experience to create further shareholder value. Apart from its offshore interests, Resilient has 28 dominant regional shopping centres in South Africa.
Dipula B shares shot up 7.4 percent to R4.50 on Friday morning after the potential deal was announced, while Dipula’s A shares fell 4.3 percent to R8.45.
Resilient’s share price was up 0.6 percent R55.79.
Dipula chief executive Izak Petersen said the transaction would provide an elegant solution to simplifying their capital structure that had frustrated the growth and fair value rating of Dipula for several years.
“In addition, the transaction bolsters our retail portfolio of township, rural and convenience shopping centres, and we expect to continue working closely with the Resilient team in unlocking value for our shareholders,” Petersen said in a statement.
Resilient chief executive Des de Beer said: “Dipula has a solid management team with great prospects that we want to get behind and support to help drive the creation of value for shareholders.”
De Beer said they envisaged the co-ownership of suitable retail assets with Dipula, and Resilient would continue to support the company once their capital structure has been simplified.
Dipula has a dual share structure with A and B shares. A shares have a preferential entitlement to any distributions, growing annually at the lower of the Consumer Price Index or 5 percent. B shareholders receive the balance of the net distributable income, resulting in the B shares continuously trading at a deep discount to net asset value.
The proposed investment by Resilient envisages that Dipula will offer to repurchase all the issued Dipula A shares from shareholders, through a combination of cash or by way of a share swop for Dipula B shares.
Dipula will offer A shareholders R6.61 per Dipula A share, subject to the pro rata adjustment of the election, so that the overall aggregate cash payable is equal to about R600 million. A shareholders will receive two Dipula B shares per A share for the remainder of their A shares.
Resilient’s proposed investment includes Dipula’s co-ownership of Circus Triangle Mall, a 34 489m² retail centre in central Mthatha.
Upon implementation of the proposal, Resilient will hold a significant investment in Dipula and will have the right to appoint one representative to the board of directors of Dipula.
Dipula said it would issue further market updates once it has resolved to proceed with the proposal.
BUSINESS REPORT ONLINE