CAPE TOWN – Fairvest Property Holdings has opted not to pursue a merger bid with Safari Investments RSA, after most of Safari’s shareholders declined Fairvest’s offer.
Fairvest’s share-swop merger proposal for Safari in March had been followed by a competing R1.8 billion cash offer for Safari from unlisted Community Property Company (Comprop) in July.
Safari’s share price increased more than 9 percent to R5.30 on Wednesday morning.
“We believe that increasing our bid to match an offer that equates to less than an 8 percent equity yield for the Safari assets would not have been beneficial to Fairvest shareholders,” Fairvest chief executive Darren Wilder said.
In terms of the Fairvest Safari merger plan, Safari would have acquired Fairvest through a scheme of arrangement, with shareholders receiving 0.45 Safari shares for each Fairvest share.
Wilder said their due diligence had convinced them that a merger would have created a specialised, lower Living Standards Measure retail-only focused fund with assets worth R6bn, a proposition that had been in line with fund managers’ strategies for property funds to consolidate, specialise and create liquidity.
“We expected that, provided we delivered performance, the merged entity would have been re-rated with additional support from its inclusion in the SA Reit and Alpi indices, ultimately driving long-term value,” he said.
Safari management said shareholders owning 55.7 percent Safari shares had voted against the Fairvest merger plan, and intended to instead support Comprop’s bid.
Safari’s independent board constituted to engage with the proposals was now in a position to “properly engage” with the Comprop bid, the statement said.
Wilder said: “We are known in the marketplace to be disciplined buyers, with a well-defined valuation framework that sets key financial hurdles for transactions. It is crucial that we maintain our discipline to only pursue transactions that ensure value creation for our shareholders over the long term.”
Safari’s share price gained 9.05 percent to close at R5.30 on the JSE on Wednesday.