CAPE TOWN – Rebosis Property Group’s share price shot up by as much as 20 percent to R0.59 a share on the JSE on Tuesday after it announced plans to merge with state-focused landlord Delta Property Fund.
The groups’ boards said a merger would represent a natural consolidation of their vision and strategy, and would help to value for shareholders.
It would provide scale and diversification, enhance their relationship with the Department of Public Works and government, and provide scale to restructure their balance sheets.
It would also help to manage loan-to-value, reduce capital costs, bolster tradeability and improve liquidity for shareholders.
A property analyst, who chose to remain anonymous, said that there were not enough details of potential benefits in the merger as there were risks for both groups, less so for Delta, hence the conjoining the balance sheets did not make the whole less risky.
“On the face of it I would rather Delta start working to get its own house in order. They don’t need the merger. They should work on renewing leases, increasing deal flow, reducing debt and trying to reduce the massive discount its share is trading at,” he said, adding that both shares were trading at big discounts.
Optimum Group economic adviser Roelof Botha said he believed it would be a good merger, particularly for Rebosis, if the combined group could cut costs and sold some properties, because there were green shoots that showed the economy was improving. Also, if construction remained constrained there could be reasonable rental growth in the not too distant future.
He said some of Rebosis’ portfolio was not that attractive, while Delta was faced with the government wanting to move some of its offices to other areas, where it did not have offices.
Due diligences still needed to be conducted. Rebosis was the first black-managed and substantially black-owned property fund to be listed on the JSE in 2011.
But in the six months to February 28 this year, Rebosis reported a loss of R2.02 billion compared with a R343.11 million profit for the same period a year before, due mainly to write downs and impairments on property values.
Rebosis shares closed at R0.56, while Delta share closed unchanged at R1.80 on the JSE on Tuesday.