Fountainhead agreed in July, subject to unitholder support, to sell all of its assets including the property portfolio to Redefine. In terms of the deal, unitholders were to exchange 100 Fountainhead units held for 82 Redefine shares. In addition, Redefine would have assumed all of Fountainhead's liabilities, including its interest-bearing debt.
The transaction would have been effective from next month. But the offer fell about four percentage points short of the required 75% consent from Fountainhead unitholders at a general meeting on Friday. Redefine, SA's second biggest locally-based listed property company has been trying to gain control of Fountainhead since late in 2012. After acquiring Fountainhead's management company in August of that year, Redefine initially intended to acquire Fountainhead's retail-based portfolio.
However, a bidding war ensued with Growthpoint Properties, and Redefine withdrew its offer in March last year. Growthpoint also wanted a piece of Fountainhead's R12bn portfolio, which ultimately ended with Redefine acquiring most of Fountainhead's shares. Redefine increased its stake in Fountainhead over time to a holding of 65.9%. Redefine is also the owner of Fountainhead Property Trust Managers Limited, the property management company of the trust.
But Redefine's mission to absorb Fountainhead's assets into its balance sheet is over. "There was a high level of voter support for the transaction, above 71%, but (it) fell short of the 75% required," Redefine CEO Andrew Konig said. "While we are disappointed by the result, it was not a completely unexpected outcome, due to the fact that Fountainhead had been trading above the swap ratio since the transaction was announced.
"Redefine could not vote its majority stake, which amplified the support required to achieve the approval threshold." Fountainhead would have to absorb transaction costs of R7.3m. Fountainhead would effectively remain an equity investment for Redefine. "As far as we are concerned, it is business as usual going forward for both Fountainhead and Redefine," Mr Konig said.
Investec Asset Management analyst Peter Clark said the deal would have enhanced Redefine's portfolio. "It made sense for a deal to go ahead given Redefine's large shareholding and management control," he said.