The founders of Balwin are leading a management buyout of the group in collaboration with the Public Investment Corporation in a R2.26bn deal that will see the group delist from the JSE.
Balwin, worth about R2bn on the JSE, said on Wednesday a consortium led by the PIC, with Balwin founder-linked investors, proposed acquiring all the group’s shares for R4.35 cash apiece.
The offer values Balwin’s total issued share capital at about R2.26bn, with shareholders set to exit at a premium to recent trading levels.
If approved, the deal would see Balwin taken private and subsequently delisted from the JSE and A2X, according to a statement on Wednesday.
“Balwin’s listed status has become less compelling, given thin trading liquidity, a persistent discount to its net asset value and the costs of maintaining a public listing. Balwin, which was listed on the JSE in 2015, was originally aimed at improving access to capital and providing shareholders with liquidity,” the group said.
Beneath the offer sits a more complex valuation picture. Balwin’s reported net asset value per share remains materially higher than the cash offer on the table.
But that value is locked inside a long-dated development pipeline, where returns are only realised over time through land development, construction, sales, bond approvals, property transfers and eventual cash collection — rather than immediate distributable cash, it said.
“The offer price is about 41% higher than Balwin’s average trading price over the past 180 days and 35% above the 90-day average, better reflecting the company’s value in a market where the counter has seen limited trading activity,” the group said.
Shareholders holding about 63.5% of the shares have already lined up behind the offer, giving it strong early backing before the formal vote.
However, some parties are excluded from the vote on the proposed scheme of arrangement and will not receive cash under the transaction, instead rolling their stakes into the private structure alongside the PIC with founder-linked investors, including CEO Steve Brookes, MD Rodney Gray and GRE Africa, linked to Buffet Investments.
Anthony Clark, an analyst at Small Talk Daily Research who has covered Balwin for many years, told Business Day the PIC-led buyout marks a new chapter in the company’s evolution.
“Balwin, as a cyclical play, depends heavily on economic growth and low interest rates to generate meaningful returns,” Clark said. “In a subdued South African economy that has weighed on the residential sector for years, stepping out of the public market with the backing of the PIC provides access to deeper capital and support for its long-term housing ambitions.”
Clark said that while the R4.35 a share offer sits well below Balwin’s net asset value of closer to R10 a share, unlocking that value would be difficult and could take years for shareholders who oppose the deal and choose to stay invested.
“Given that the share price has more than doubled over a 12-month view, from a low of about 180c to the current level, it would be in the interests of shareholders — 65% of whom have accepted — to take the money and run, because if the PIC offer lapses, there is a likelihood that nobody else would come to Balwin’s rescue,” he said.
Clark said the best course of action for the group is to become a private entity and to conduct its affairs and its development behind closed doors, with the fundamental backing of the powerful PIC.
“This transaction brings together long-term capital from the PIC and Balwin’s existing shareholders. Importantly, management and reinvesting shareholders are staying invested because they believe in the company’s development pipeline and long-term prospects,” said CEO Brookes.
He added that private ownership would give Balwin the stability and long-term backing needed to support its development pipeline and strengthen its position in the residential property market.
The PIC already holds significant property investments, including a stake in the V&A Waterfront alongside Growthpoint Properties, as well as a stake in Attacq’s parent company.
The proposed Balwin deal would deepen its exposure to the property sector, adding to its broader portfolio of unlisted property investments.
The transaction is subject to shareholder approval and clearance from competition authorities.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.