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SA Retail spurns advances from Hyprop

Posted On Tuesday, 05 April 2005 02:00 Published by eProp Commercial Property News
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Listed property loan stock company's takeover bid for competitor SA Retail Properties is an attractive offer for unit holders.

Angelique de Rauville

Listed property loan stock company Hyprop Investments' takeover bid for competitor SA Retail Properties is an attractive offer for unit holders, say property commentators.

The offer will force SA Retail and listed property unit trust Martprop - both of which are managed by Marriott - back to the drawing board.

Last week, before Hyprop launched its takeover attempt, SA Retail and Martprop announced a proposed property agreement that would see them co-owning their retail properties - a move some analysts saw as a defensive strategy against a possible hostile takeover bid.

In terms of their retail property deal, if a third party intended to strip the assets out of SA Retail, Martprop would have a pre-emptive right to the properties.

But Hyprop, which is offering SA Retail unit holders one Hyprop unit for every 2,7 SA Retail units at an implied price of R8,07 a unit, is not taking this lying down.

Hyprop MD Pieter Prinsloo says the SA Retail-Martprop transaction is not in the interests of SA Retail unit holders. He says it constitutes "frustrating action" in terms of the Securities Regulation Panel code on takeovers as SA Retail's board had reason to believe a takeover bid might be imminent when it made the deal.

Hyprop is making a representation to the regulation panel on the matter and wants the regulator to issue a ruling that would see SA Retail unit holders being asked to vote on the SA Retail and Martprop transaction.

And blue chip Hyprop, owner of retail gems Canal Walk shopping centre in Cape Town, Hyde Park, The Glen and the Rosebank Mall in Johannesburg, is offering a sweetener to SA Retail unit holders.

Hyprop says the unit holders will get the distribution due to them in May by SA Retail, irrespective of whether they accept Hyprop's offer before the payment date.

The implied price of Hyprop's offer is already at a 7,6% premium to SA Retail's average recent trading price of about R7,50.

Colin Young, fund manager for Old Mutual's South African-listed property funds, says Hyprop's proposal is a "very fair offer".

He says if the final SA Retail distribution next month is at least 36c, then the Hyprop offer price is equal to about R8,30 in "today's price". He praised Hyprop as "tactically superb" for waiting for SA Retail and Martprop to make their made their property deal announcement.

"What comes out is a cross-pollination property deal and (Hyprop) set out and immediately made their offer. Now SA Retail and Martprop will have to scramble to come up with a more attractive alternative," says Young.

By contrast, he says, the proposed SA Retail-Martprop deal is "unattractive" and, if put to the vote, would probably be rejected by unit holders.

"They'll have to come up with a more attractive alternative or, based on current facts, leave us fund managers with little alternative but to vote for the more attractive Hyprop offer."

Mariette Warner, fund manager for Stanlib Property Income Fund, says the Hyprop offer is attractive for unit holders because of its pricing and Hyprop's "very good" track record in terms of consistent earnings growth and unlocking value for unit holders.

Angelique de Rauville, MD of listed property portfolio management company Provest, a part of the Investec Property Group, says the SA Retail-Martprop deal is a "defensive strategy for the type of offer we now see".

The Hyprop offer "stacks up particularly well relative to the announcement" made by SA Retail and Martprop on Wednesday.

Said De Rauville: "Given that Marriott still wants to protect its property assets, and the attractive Hyprop offer, it's likely there'll be an announcement specifying that a consolidation of SA Retail and Martprop is forthcoming.

"I think this is only the start of what's usually fairly time-consuming corporate activity within the listed property sector.

"It's not unusual for significant transactions such as this to take as long as 12 months to conclude, particularly in light of the fact that there's a competing bid," she said.

However, SA Retail and Martprop believe their retail property deal is attractive to investors.

SA Retail MD Peter Sparks said last week the two funds already jointly owned six R574m retail properties and were currently developing the Umlazi Megacity, a 27,000m² centre in Durban, at a capital cost of R150m.

Last modified on Saturday, 10 May 2014 13:41

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