Shopping centre owner Resilient Reit has proposed a R1bn investment into commuter retail-focused Dipula Income Fund, which could see the latter get rid of its dual-share structure.
Dipula said on Friday Resilient wants it to buy out its A shareholders, who get preference in terms of payouts.
Resilient would acquire more than 25% of Dipula through the cash injection. This will give Resilient exposure to a mix of retail, industrial and residential assets spread across SA.
The deal helps Resilient to diversify against risk. The company has tended to own shopping centres that dominate towns and catchment areas as opposed to large malls in dense business nodes.
When Dipula listed in 2011, it did so with the A-B structure so it could appeal to investors with different risk profiles, but this structure is viewed as problematic for some, as holders of B shares often do not get much income when times are tough.
A shares are entitled to preferred income growth of the lower of 5%, or consumer price inflation, while B shares receive the remaining distributable income.
Resilient, valued at R22.2bn on the JSE, said in its full-year results to end-June it had identified a management team “it wishes to get behind in order to help drive the creation of value for shareholders.”
“Resilient envisages that it will co-own suitable retail assets with Dipula and will continue to support Dipula to play a leading role in the listed property sector,” it said.
Dipula said on Friday Resilient would invest R1bn in order to hold “meaningful shareholding” and the right to nominate an appointment to the board of directors.
The proposal, still to be agreed upon by Dipula, would see it offer to repurchase its issued A shares, with shareholders able to elect between cash and B shares.
This could either mean R6.61 per Dipula A share, about a 25% discount to where they closed on Thursday, or a swap of two B shares for every A share.
“We have been looking for a while for an investor to come in and enhance our liquidity as well as help us improve our corporate structure. I believe that following an investment by a highly regarded fund such as Resilient, Dipula will re-rate as a company and we will see strong share price growth, rewarding our loyal shareholders,” Dipula CEO Izak Petersen said.
Dipula’s strategy has a bias towards convenience, rural and township centres, and its portfolio is worth about R9bn.
Its A shares fetched R8.83 as of Thursday and its B shares R4.19. The total market value of its A shares amounted to R2.33bn, and its B shares R1.1bn.
Resilient, which was formed by CEO Des de Beer, and listed on the JSE in 2002, owns a portfolio of dominant regional malls and shopping centres tenanted predominantly by national retailers.
Keillen Ndlovu, head of listed property funds at Stanlib, said the deal was a “win win for both parties”.
“Dipula has been an undervalued stock which has quietly delivered. Liquidity has been an issue. There is value in the company which Resilient can help unlock,” he said.
Dipula’s A shares closed 2.83% lower at R8.58 on Friday, while its B shares closed 1.43% higher at R4.25.
Resilient was up 0.07% at R55.50.
With Alistair Anderson
Update: August 27 2021
This article has been updated with share price information.
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