Dipula Income Fund, a diversified SA invested property group, has made an offer to take over SA Corporate Real Estate in a deal worth R9bn. The proposed transaction is likely to trump an offer by premium offices owner Emira to SA Corporate.
Dipula said the merged entity will be better positioned to “withstand macroeconomic headwinds, be able to better leverage its position with suppliers and tenants and position itself as a consolidator rather than a target”.
SA Corporate owns industrial, office, retail, residential and storage assets.
With a combined market capitalisation of R13.6bn, the merged entity “can become one of the more tradable entities” on the listed property index, Dipula said. The entity would have assets worth R27bn, making it the JSE’s largest majority black-owned and managed property group.
Dipula’s bid follows that of premium offices owner Emira, which said earlier in July that it had made an offer for SA Corporate in a deal that would create a group worth about R15.5bn.
The takeover would be Dipula’s first since it listed in 2011.
CEO Izak Petersen said in May 2018 that Dipula was looking for merger and acquisition opportunities while share prices remained under pressure and smaller property companies struggled to compete in a slow economy.
“We have been very patient but that didn’t mean we weren’t looking for deals. We have focused on SA and we believe that SA Corporate would be a great fit for us,” he said on Friday.
SA Corporate has “a strong asset in Zambia which we like but they haven’t taken gambles overseas so that suits our investment criteria. There are synergies between our retail and industrial portfolios. You don’t get opportunities to acquire assets like this often,” Petersen said.
Tenurey BSM, which has advised Dipula on the offer, said the deal is much more attractive than Emira’s.
“We believe that Dipula will be able to extract value from these assets which other parties can’t. Dipula has a large team of about 80 people in-house while other companies outsource property management. The portfolios are a very good fit and the merged entity would be a sizable fund with improved liquidity,” Panico Theocharides, a director at Tenurey BSM, said.
Stanlib head of listed property funds Keillen Ndlovu said Dipula’s offer shows there is perceived value in the listed property sector again after 2018, in which it made a 25.26% loss including dividends, its worst return in recent memory.
There was little consolidation among property stocks in 2018 and 2017, but this changed in 2019 with SA Corporate and Safari Investments having received takeover offers in recent months.
Fairvest and Community Property have made offers for Safari, which invests in shopping centres in rural areas and small towns, and has a mall in Namibia.
“Emira kick-started the interest for SA Corporate. It’s interesting to see better-priced offers come through. It shows that there’s some value in the listed property sector despite the currently depressed prices,” Ndlovu said.
Regarding for example the Safari Investments deal “with the +35% counter offer in cash from unlisted Community Property”, Fairvest was “almost on the verge of closing the deal with Safari when the offer came through”, he said.
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