Wheel­ing and deal­ing

Finweek English Edition - - Companies & markets - JOAN MULLER

HARDLY A MONTH goes by with­out Re­de­fine In­come Fund an­nounc­ing it’s in­volved in yet an­other round of merger and ac­qui­si­tion talks. The Madi­son-man­aged loan stock com­pany has been on an ag­gres­sive growth trail over the past 12 months. Its most re­cent coup was ac­quir­ing Spearhead Prop­erty Hold­ings in a deal worth R1,3bn. The Spearhead takeover pushed Re­de­fine‘s mar­ket cap be­yond R5bn, mak­ing it one of the sec­tor’s five largest coun­ters.

Prior to the Spearhead trans­ac­tion, Re­de­fine was ru­moured to be eye­ing a num­ber of other smaller funds in­clud­ing Am­bit and Paramount. Now it seems Re­de­fine has its sights on Cape-based prop­erty counter CBS Prop­erty Port­fo­lio. Ear­lier this month, Re­de­fine and CBS is­sued cau­tion­ar­ies on the same day.

An­a­lysts be­lieve that this is no co­in­ci­dence as Re­de­fine bought a chunk of CBS shares at end-2006. It al­ready owns around 9% of CBS’s is­sued share cap­i­tal.

Re­de­fine share­hold­ers will no doubt ben­e­fit if such a deal is con­cluded as CBS’s port­fo­lio – some 48 build­ings val­ued at R1,7bn – is highly rated, with its top 10 prop­er­ties in­clud­ing Sun In­ter­na­tional’s head of­fice in Sand­ton, the Wedge Shop­ping Cen­tre in Morn­ing­side, Sand­ton and the Palm Grove shop­ping cen­tre in Dur­banville, Cape Town.

An­gelique de Rauville, CEO of In­vestec Listed Prop­erty In­vest­ments, be­lieves the deal would en­hance earn­ings for Re­de­fine as CBS trades at a slightly higher yield (7,4%) than Re­de­fine’s 7,1%.

Ques­tion is: at what price will Re­de­fine pitch its of­fer? The com­pany will no doubt have to pay a pre­mium to en­tice CBS founders Ivan Klerck and son-in-law Gary Fisher to part with their share­hold­ings. De Rauville es­ti­mates that Klerck, Fisher and fel­low ex­ec­u­tive direc­tors and for­mer Primegro founders Derek Green­berg and Martin Et­tin have a com­bined share­hold­ing in CBS of around 25%.

Re­de­fine’s con­tin­u­ing merger-and-ac­qui­si­tion drive has al­ready paid off for share­hold­ers, with the fund de­liv­er­ing in­come growth of 16% in the year to endAu­gust 2006, com­pared with a sec­tor av­er­age of 12%. Re­de­fine man­age­ment re­cently in­di­cated that ad­di­tional in­come flow­ing from the Spearhead port­fo­lio would de­liver dis­tri­bu­tion growth of 18% in the year to endAu­gust 2007.

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