SA focused REIT Dipula makes bid merge with SA corporate real estate

Posted On Wednesday, 31 July 2019 18:35 Published by
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Dipula Income Fund, a diversified, South-African focused and Black-managed REIT, today announced a non-binding offer to acquire 100% of the shares in SA Corporate Real Estate Limited through a merger of the two companies.


The indicative offer price of R3.55 per SAC share represents a 26% premium to the clean 30-day volume weighted average price (VWAP) of R2.83 per SAC share as at 9 July 2019 (being the date prior to the date on which a competing expression of interest was made for the acquisition of shares in SAC).

“A friendly merger will unlock significant value for both companies’ shareholders. We have an aligned and long-serving management team that has demonstrated their ability to unlock value even in difficult market conditions ,” commented Dipula CEO, Izak Peterson.

“The merged entity will have a portfolio value of approximately R27 billion, from Dipula’s current R8.6 billion, and a market capitalisation of R13.6 billion, positioning it as a mid-cap REIT on the JSE with eligibility for SAPY inclusion.

“Our strategy has always been focused on South Africa – we have deep experience in unlocking value from especially peri-urban areas with the ability to negotiate complex community issues.

“Our internalised asset and property management teams are well placed to dedicate significant time to the merged portfolio, without overextending themselves.

“Synergies, diversity and scale extracted from the merged portfolio could result in a reduction in the cost of debt as our ability to access better rated paper in the capital markets will improve. This will provide us with additional headroom to act opportunistically in the current constrained market,” Peterson added.

According to Dipula, the merged entity will have limited exposure of approximately R2 billion to the depressed corporate office sector. The sectoral split of the merged portfolio by value will comprise approximately 46% retail, 8% office, 29% industrial and 17% Afhco (a residential, retail and commercial property company with the assets primarily located in Johannesburg’s inner-city). The Company views it’s A and B share capital structure as a unique mechanism to fund acquisitions and grow the merged entity in the medium to longer term.

“Dipula’s A and B capital structure is virtually unique in the SA REIT market. Our A shares have historically enjoyed strong demand from institutional investors, growing at an annual yield of the lower of CPI or 5%. The liquidity created by the merged entity will likely result in a re-rating of the shares, to the benefit of all shareholders,” said Peterson.

The proposed transaction will be implemented by way of a scheme of arrangement in terms of Section 114 of the Companies Act and effected through a share-for-share consideration, based on each company’s respective distribution per share.

Assuming an effective date of 1 December 2019 and Dipula’s current equal weighting of A and B shares in issue, the switch ratio equates to approximately 0.19 Dipula A shares and 0.24 Dipula B shares for every 1 SAC share, equal to a combined switch ratio of 0.43 Dipula shares for every 1 SAC share.

On conclusion of the proposed merger, SAC shareholders will own approximately 67% of the merged entity, significantly benefitting from the value unlock.

  • Non-binding offer and engagement with SAC board on friendly merger
  • Indicative offer price of R3.55 per SAC share (based on an indicative income for income switch ratio)
  • Indicative offer price represents a 26% premium to 30-day VWAP of SAC shares
  • Transaction to be value accretive for shareholders of both companies
  • Significant synergies to be unlocked, positioning larger entity as mid-cap REIT
  • Strong management team with proven ability to unlock value
  • Meaningful number of SAC shareholders positive on pricing and merger rationale
Last modified on Wednesday, 31 July 2019 18:45

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