It has been a few weeks since Prime Kapital Investments (PKI) last upped the ante in its siege of MAS Real Estate. Since then the air has grown thicker with shareholder disquiet. A fresh volley arrived last week in the form of another Sens announcement, another sugar-coating of what remains at its core a bid for control without accountability.
This time, PKI has raised the cash component of its voluntary offer to €1.20 per share. The total cash pot now stands at €100m, a 175% increase from where it began just a month ago. A few more nibbles at the offer and we will be talking about real money. But even with that the market yawned.
The MAS share price rose 6.4% on the day, a modest pop, but it still wallows well below what many consider fair value and the sweetened offer. Many institutional holders appear to be holding their noses, unwilling to sell into what increasingly looks like a veiled attempt to seize board control at a persistent discount. That discount to net asset value remains as vast the credibility gap of MAS’s board.
Why? Because investors can smell what is really going on. PKI isn’t bidding for all of MAS. Not really. This is a selective land grab. With just an additional 15% of the share register in hand, they cross the critical 35% control threshold set by the MAS board’s curious relaxation of its memorandum of incorporation requirements for a mandatory offer at 30%, thereby gaining a boardroom majority under SA and Malta’s rules. All this achieved without having to launch a mandatory bid for the rest.
Clause 5.8 of the initial offer remains the trapdoor: by structuring this as a voluntary bid with explicit exemption under Malta’s takeover rules, PKI is engineering a control scenario in which minority shareholders are left with no recourse, no voice, and possibly no upside.
The strategy is as brazen as it is brilliant: offer just enough cash to tempt weary investors, especially those without the appetite or mandate for the murky preference shares that accompany the offer. Capture an extra 15% of the register and you have the keys to the castle. No need to overpay. No need to disclose. Just enough movement to trigger control without responsibility. And then offer opaque listed preference shares that you promise to redeem sometime soon in the future, obviously expecting minorities to trust PKI that the redemption of these pref shares will be at market value, unlike the previous preference shares extended to PKI’s joint venture that deserved a haircut.
And it is working, at least in terms of mechanics. But not in terms of perception. Because perception is starting to curdle into suspicion. And suspicion, into resistance. A whisper from one particularly sharp analyst says it all: “They only want 15% more of the company. That gets them the board. And then they will just continue to mistreat minorities.”
What are they trying to hide? Could it be the developmental joint venture (DJV) agreement, the joint venture between MAS and Prime Kapital, which neither side has disclosed, citing a nondisclosure agreement. The very same JV that drew down hundreds of millions in capital from MAS, paid no dividends back, and hollowed out the listed vehicle’s capacity to pay its own shareholders. MAS’s dividend dried up. The share price withered. Prime Kapital stepped in and started buying at depressed prices.
Now, PKI is using the strength of that JV, which is MAS’s own former balance sheet, to finance an offer for the rest of the company. MAS’s capital is, in a real sense, being used by a third party to buy MAS.
It is almost poetic, if it weren’t so cynical.
And yet, the response from the MAS board is a study in inertia. Still no statement. No rebuttal. No defence. Perhaps they are too compromised by history. Perhaps the line between oversight and collusion has long since blurred.
There is, thankfully, a glimmer of resistance. The Hyprop announcement changed the tempo. Though Hyprop CEO Morne Wilken hasn’t tabled a formal counter-offer, the suggestion alone was enough to rattle PKI into raising its terms in fear of a bidding war. And it suggests there is still leverage to be found if shareholders are willing to use it.
Now, in an apparent effort to stem the backlash and look more benevolent, PKI has proposed an alternative. They say they will ditch the bid if shareholders agree to what they call the “Enhanced Value Unlock Strategy”. That includes winding up the DJV five years earlier, accelerating asset sales, and channelling earnings back to MAS investors, all wrapped up with a proposed €100m “special distribution”.
It sounds almost principled. But you don’t threaten a takeover, table an offer, raise it twice and then suddenly find religion. This isn’t a change of heart so much as it is a change of tactics. A final bluff to coax support from fence-sitters. The intention to gain control, one way or another, remains unchanged.
And yet again the fundamental questions remain unanswered. What’s in the DJV agreement that MAS shareholders still can’t see? Why should minority investors trust a party that has already used their capital once to engineer this saga? Is the DJV so damning that it warrants regulatory intervention?
Because if this were a clean play for yield, or to grow assets under management, or to run a listed vehicle better, we would expect transparency. Instead, we get a refusal to publish the DJV agreement between MAS and Prime Kapital, citing a nondisclosure agreement, even as that agreement appears to sit at the heart of how Prime Kapital extracted capital from MAS and stopped it from paying dividends, thereby engineering the share price down.
Time favours PKI though. They don’t need to win tomorrow. They just need to keep the siege going. Wear the market down. Let governance fatigue do the work. Let the opacity persist. Let the DJV remain locked behind legal curtains. Let the institutions hesitate, unsure whether to fight or fold.
How will the likes of the PIC, Coronation, NinetyOne, Sanlam, Meago, Sesfikile and Catalyst respond in the face of this blatant opportunism? Will hedge funds look to be predatory in enabling PKI control?
In the coming weeks watch out for the updated circular from PKI, including revised preferential share terms; whether Hyprop formalises a counteroffer or walks; institutional shareholder pushback, or lack thereof; and any movement on disclosure of the DJV terms.
For now, MAS shareholders face a fork in the road: capitulate to the siege or hold the line and demand a fair fight.
• Avery, a financial journalist and broadcaster, produces BDTV’s ‘Business Watch’. Contact him at michael@fmr.co.za.
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