IRONGATE Group, formerly Investec Australia Property Fund (IAP), said yesterday that it had received a “highly conditional” and “unsolicited” A$1.1 billion (R12bn) takeover offer from fund manager 360 Capital Group, a company that IAP's board previously warned might make a predatory offer.
The offer was for all shares in Irongate that 360 Capital did not already own for A$1.6047 cash per security, which was made up of a headline price of A$1.65 less the anticipated distribution of A$0.0453 per IAP security for the half-year to September 30.
Irongate's share price rose 3.66 percent to R16.69 on the JSE yesterday around midday, while in Australia the price was up by the same percentage to A$1.56 per share.
The proposal was conditional on ESR Real Estate (Australia) entering into an agreement with 360 Capital to purchase an undisclosed number of IAP assets on terms yet to be agreed, a statement from IAP said.
360 Capital already owns about 19.11 percent of IAP.
In July, the IAP board effectively alerted shareholders against a bid from 360 Capital, when it asked shareholders not to vote two 360 Capital directors to its board, stating: “The board is concerned, having regard to a number of previous situations in which 360 Capital Group have accumulated up to 19.9 percent security holdings in listed entities and then launched or agitated for major strategic corporate action.
“The board is concerned that ... 360 Capital Group could seek to gain effective control of IAP below its fundamental value.” Shareholders later voted against the appointment of the two directors at the annual meeting.
IAP's board said yesterday that it was considering the offer with its advisers, but it also noted the proposal was “highly conditional and uncertain”. They said 360 Capital's internal funding resources had not been identified and were subject to approval, while additional third party financing was required.
360 Capital still needed to reach an agreement with ESR Australia to buy undisclosed assets in IAP's portfolio, and the fund manager needed new debt facilities from Citibank, for which 360 Capital had obtained “a highly conditional non-binding letter of support from Citibank”.
Other conditions included completion of due diligence, final approval of the 360 Capital board, execution of a scheme of arrangement on customary terms including the provision of exclusivity and deal protection, JSE and other regulatory approvals, and a “unanimous recommendation of the IAP board. IAP is a valuable internalised real estate platform and going concern that owns a unique portfolio of Australian real estate assets and a profitable and growing third party funds management business.
“The IAP board in all circumstances will seek to ensure that any control transaction involving IAP will achieve fair and full value inclusive of an adequate control premium for IAP security holders,” the IAP board said.
The Simply Wall St website said recently in a report: “360 Capital Group's EPS has fallen by approximately 26 percent per year during the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.”
360 Capital said in an update this month that it held a strong balance sheet with A$95m in cash post settlement of the FibreconX transaction, and it had an unaudited net asset value of about A$1 per share, with less than A$10m in unlisted assets, no borrowings and the balance of their assets in Australia Stock Exchange listed securities.