Listed property loan stock company Paramount Property Fund's (Paraprop's) empowerment transaction apparently fell through because the company is about to be taken over by listed property loan stock company Redefine Income Fund.
Paraprop said on Friday that its proposed transaction with a new empowerment company, led by Mvelaphanda, had stalled due to shareholder resistance.
Paraprop announced in April that it would sell a 26% interest to the empowerment company. But at a meeting on Friday, shareholders shot down the deal down.
A total of 77,14% of shareholders were present in person or by proxy, with 67,35% voting in favour of the transaction and 32% voting against.
Paraprop, which is trading under a cautionary notice, would not speculate on the reasons the deal did not succeed.
Redefine, which is also trading under a warning, could not comment. But industry sources aid Redefine, which owns a significant interest in Paraprop, a company with a relatively small market capitalisation, had voted against the deal because it was making a bid for Paraprop.
An empowerment transaction would have delayed Redefine's takeover plans.
Angelique de Rauville, MD of Investec Listed Property Investments, said: "We believe the Madison listing would facilitate a number of plays by the Madison-managed companies on the other smaller cap stocks."
Property asset manager Madison, which manages Redefine, Hyprop Investments and ApexHi Properties, listed last week.
De Rauville said last month that in most cases, listed property unit trusts and property loan stock companies on the JSE had contracts with external management companies such as Madison to handle their day-to-day asset management responsibilities.
Merger or acquisition activity could be restricted in cases where cancelling these contracts could can be "prohibitively expensive" for the listed entities themselves.
She said at the time that the Madison listing would provide a solution to this, offering the opportunity to convert shareholdings in the external management companies into a more tradable Madison shareholding, with no cancellations of contracts, and therefore no adverse implications to earnings for listed property investors.
In principle, Investec Listed Property Investments had been "long-term supporters" of consolidation in the listed property sector, she said.
Andre Stadler, MD of Catalyst Fund Managers, said there was an opportunity for consolidation in the sector. The Madison vehicle provided an additiona way for the group to facilitate such takeover deals.
Business Day
Publisher: I-Net Bridge
Source: I-Net Bridge
