Hi time for corporate row
WE HAVEN’T HAD a decent corporate row this year, so I’m pleased to see that one may be developing at last. The general subject is Redefine’s bid to consolidate South Africa’s listed property sector – in particular, its plan to absorb ApexHi – and the specific relates to the suggested price for the most recent addition to ApexHi’s complicated capital structure, its C units.
At ApexHi’s recent results presentation, fund manager Alan McConochie, who has form in this area, questioned the price for the C units, suggesting holders of this security would lose out significantly in terms of income. In its latest (December 2008) quarter, holders of C units received a payment of 17,5c, which can be crudely annualised at 70c. The proposed share exchange terms are 104 Redefine per 100 ApexHi C, a much leaner ratio than the 202 Redefine for every 100 ApexHi A units and 246,8 Redefine per 100 B units.
Redefine marginally reduced its distribution in the November quarter to 13c (13,3c), which annualises to only 52c, though it actually distributed 56,63c/unit in the year to August 2008. The cut in the November declaration was attributed to timing differences and in its preliminary statement Redefine hoped to lift total distribution this year by 9% to 11%.
If we allow a 10% hike that will come out at a distribution of 62,3c/unit this year, or about 64,8c on 104 units, almost 10% less than the historic payout on ApexHi C units, which can also be conservatively expected to grow by around 10% this year.
So there does indeed appear to be a potential 20% haircut to the income of holders of ApexHi C units, many of whom will indeed have been attracted to the stock by its yield potential.
However, the preliminary offer documents hope the enlarged Redefine will distribute about 75c/unit this year. That would eliminate the income shortfall on ApexHi C units, with an equivalent of 78c, but implies that the merger will permit a 30% lift on historic payout. Is that realistic?
I’m not at all sure it is, even though there’ll be a saving of R80m to R90m on the management fee ApexHi pays Madison, which will be brought in-house, and something similar may apply for Redefine, though its market cap is only roughly half ApexHi’s.
So I reckon we’ll hear more about this one. STRUGGLING TO GET RICH I CAN NO LONGER AFFORD to read the London Financial Times daily, but every now and then I manage to glance at a copy in one of those plush Jo’burg hotels that furnish their lounges with copies for the benefit of guests.
The other day I picked up a thought from a reader’s letter in the FT that’s worth passing on. Referring to the ludicrous bonuses paid to investment bankers, the reader was reminded of the comment passed on all the idealistic young men who flocked to Washington to work for Franklin Roosevelt’s New Deal in the Thirties: they came to do good and stayed to do well.
Does that not encapsulate so much of what’s wrong with our own body politic, when even a professed Communist can brazenly admit he joined the struggle to get rich?