MICHAEL AVERY: The Malta Job part III — enter the minority cavalry

If you were watching the MAS Real Estate boardroom drama for pure corporate entertainment, grab your popcorn. Because just when it looked as if Prime Kapital was going to quietly squeeze MAS’s minority shareholders in a slow-burn takeover worthy of Machiavelli, along came Hyprop CEO Morne Wilken and suddenly the room smells less like resignation and more like a fight. 

What had seemed a slow, drawn-out squeeze, marked by dividend droughts, preference share sleights-of-hand and shareholder fatigue, has suddenly turned into a live auction. And with the game now truly afoot, MAS shareholders have gone from being hunted to holding the keys to the kingdom. 

Let’s rewind. Fresh from Prime Kapital’s aborted and highly suspect €291m transaction with MAS Real Estate, Martin Slabbert’s Prime Kapital, through its investment vehicle PK Investments (PKI), announced a voluntary offer to mop up the remaining MAS Real Estate shares it does not already own at a cheeky €0.85 per share on May 16.

That was well below the stock’s then-market price and represented less than 45% of net asset value. For those seeking a cash exit the amount was capped at a rather stingy €40m. Everyone else would be left with preference shares, nonvoting, illiquid and redeemable at PKI’s discretion, with capped upside and formulaic redemption mechanics that would make a structured credit trader blush.

It didn’t take long for analysts and fund managers to start throwing penalty flags on the play. Mazi Asset Management’s Kopano Makhu called it what it is: “strategic opportunism”. Another large fund manager went a step further, describing the entire structure as “a bit of a crook”. Off the record, of course. 

As it turns out, MAS had extended substantial funding to a joint venture vehicle with Prime Kapital, the same vehicle now used to support the very bid to acquire MAS. Here’s how the game was played. Prime Kapital draws cash from a joint venture funded by MAS, refuses to pay dividends back to MAS, MAS suspends its own dividend, the share price tanks, and voilà, Slabbert swoops in and hoovers up stock at bargain-bin prices. It was a masterclass in control-by-depletion.

Enter Hyprop. On May 26 the JSE-listed shopping centre giant publicly declared its interest in acquiring MAS. The timing wasn’t coincidental. Word had already been circulating that shareholders were unhappy.

Some were pushing back against Prime Kapital’s opaque terms and the board’s studied silence. Wilken knows the MAS assets from his time as CEO in 2018, and the announcement brought those tensions to a head. Suddenly there is an alternative suitor, one with local credibility, public market discipline and no history of structured sleight-of-hand. 

Within 48 hours Prime Kapital blinked. On May 28 PKI rushed out an announcement increasing its offer price by 30%, from €0.85 to €1.10, and doubling the maximum cash on offer from €40m to €80m. That’s not price discovery. The timing alone makes the motive clear. This was a scramble to pre-empt a bidding war and blunt the Hyprop narrative before it gained traction. 

What made the whole gambit work, until now, was the sheer inertia of the situation. MAS shareholders were stuck between a rock and an unlisted redeemable instrument. And because of a quirk in the Malta-incorporated company’s articles and exemptions (clause 5.8, for the anoraks), Prime Kapital could push its stake beyond the 35%, or even 50%, threshold without triggering a mandatory offer. The trap had been set. 

But even the revised offer leaves key issues unresolved. For one, the preference shares — the “consideration instruments” — remain a minefield. One albatross tells me under certain fund mandates they may be deemed debt instruments, making them unownable by some institutional investors. Even if amendments are made (which PKI has reserved the right to do), the fact remains: their value is uncertain, redemption is discretionary, and upside is capped in a way that always favours the issuer. Some estimates I’ve seen, depending on the redemption date and assumed net asset value growth, place the effective discount range anywhere from minus 2% to minus 43%.

That a transaction of this magnitude could in effect bypass SA takeover rules because MAS is incorporated in Malta raises uncomfortable questions about the JSE’s commitment to protecting minority shareholders in cross-border structures.

There’s also the broader question of governance. MAS’s board has yet to come out with any recommendation on either the original PKI bid, its revised version or the Hyprop offer. In this context silence is a kind of complicity. For shareholders to be asked to choose between two offers, one of which was deeply unfriendly to minorities and structured with breathtaking complexity, is a failure of leadership. And yet it’s consistent with the MAS board’s recent track record, which has been marked by opacity and what some in the market regard as captured behaviour. 

What Hyprop’s offer does is restore leverage to shareholders. It suggests there may be an alternative route forward, one that doesn’t involve swapping equity freedom for preference ambiguity. It also forces Prime Kapital to play in the open, where competitive tension and fair pricing can do their work. 

Of course, Hyprop’s interest is far from a done deal. If it can’t get majority support it may walk away. But even the threat of competition has proven powerful enough to pry €0.25 more per share from PKI’s pocket. Imagine what might happen if the Government Employees Pension Fund and other institutions started publicly co-ordinating their opposition or signalled a preference for a cleaner, simpler offer. 

For now, MAS shareholders are in a position they haven’t been in for some time: they have options. That’s not to say they’re spoiled for choice, but at least there’s a choice. 

The real lesson here, though, may be about the future of dual-listed governance and regulatory arbitrage. That a transaction of this magnitude could in effect bypass SA takeover rules because MAS is incorporated in Malta raises uncomfortable questions about the JSE’s commitment to protecting minority shareholders in cross-border structures.

If this saga ends with Prime Kapital in control of MAS, using MAS’s own capital, under terms dictated by Malta exemptions and private instruments, then honestly, what precedent does that set? 

• Avery, a financial journalist and broadcaster, produces BDTV's ‘Business Watch’. Contact him at michael@fmr.co.za.