Tiber shareholders take half R6.6bn sale proceeds in Growthpoint shares at R27, a 10% premium
SA's largest listed property group Growthpoint has been hunting the privately owned Tiber for more than two years. The deal was finally secured this week – with the Tiber shareholders agreeing to take roughly half their R6.6bn in Growthpoint shares priced at R27 – a substantial premium to the current R24,85 share price. That will give confidence to other shareholders in the R48bn property group.One of the major consequences of the deal, as Anton de Goede explains in this interview, is that Redefine will now have a free run at Fountainhead, the business which upon which Growthpoint previously had designs. – AH
ALEC HOGG: Yesterday Growthpoint announced that it's going to acquire the entire Tiber Group portfolio of top-quality offices in Sandton and nearby suburbs and the portfolio's management business in a R6.6 billion transaction. Anton de Goede from Coronation Asset Management now joins us on the line from Cape Town. Anton, the disclosure came just a little too late for us to talk to you yesterday. In fact, it was right towards the end of this program that it came out, but 6.6 billion rand – the biggest yet for Growthpoint.
ANTON DE GOEDE: It is quite a sizeable transaction. I think it's around the 10/15 percent of its current SA portfolio and it is larger than the V & A transaction that they did together with the PIC two years ago.
ALEC HOGG: And it's on its own this time – not with the PIC – so I suppose in relative terms of a R48 billion market cap, when you're putting another six and a half on top of that, it's a big bet.
ANTON DE GOEDE: It's actually a bit smaller than that. If you take the R48 billion market cap and the add two and a half billion equity that's going to be issued, it's only five percent of the current market cap of the portfolio that will be issued to the Tiber Group.
ALEC HOGG: We here at CNBC know Tiber quite well. They are the landlords of this business, but what is their reputation like in the marketplace?
ANTON DE GOEDE: The portfolio that Growthpoint is buying is a good-quality portfolio with prime offices in some of the prime suburbs in Johannesburg, so it is quite a quality portfolio that's coming onto Growthpoint's books. The only interesting thing is that some of those rents that they're buying their properties on, seems a bit higher than market rent, but as I said those properties are prime properties for instance, there within Sandton itself and quite new properties, too.
ALEC HOGG: The commercial centre of Africa: Tiber started more than 50 years ago. The death of the founder (Francesco Rivera) no doubt had some influence in the fact that it did come on the market.
ANTON DE GOEDE: Yes, that's true and it's fantastic that the current management team will stay on for three years as part of the deal to just take the fund forward into Growthpoint and just make the integration easier.
GUGULETHU MFUPHI: Anton, just how significant is this deal, as well as the acquisition of Tiber, on Growthpoint's books.
ANTON DE GOEDE: As I said, the R6.6 billion transaction is only about 10 to 15 percent of Growthpoint's current SA portfolio. Remember that Growthpoint also owns around 65% of Growthpoint Australia, so although it's a sizeable deal and the largest that they've done, it is not a game-changer deal for Growthpoint.
ALEC HOGG: We've been following listings of the ADR's on Growthpoint on the American Stock Market. Clearly the bigger you are, the more those types of investors would like you. Do you think that's going to influence the investors at all – the fact that they're now going to be a little bit bigger?
ANTON DE GOEDE: They will be bigger, but if you look at the listing price of the units being issued for the transaction, it is at R27.00, which is higher than the current share price, so I doubt if the initial increase in market cap will cause more liquidity. However, Growthpoint is always seen as a bell weather for the sector due to its size and its liquidity, so I think the investment into Growthpoint from an ADR point of view, is much more investment into SA property as such.
ALEC HOGG: That's quite a premium on the current market price: R27.00 that the share is going to be issued at and its R24.50 now. Just explain to us how that is possible.
ANTON DE GOEDE: As I understand it – and I'm speaking under correction because I haven't spoken to management yet – is that the deal had been negotiated for the past few months already. If you remember correctly, since May the listed property has had a bit of a sell-off, so they probably started negotiating prior to the sell-off the sector and negotiated on the price at that stage.
ALEC HOGG: It's quite a lot of stock that's going to be given to the people that own Tiber at the moment. Do you have any visibility into who those shareholders are?
ANTON DE GOEDE: Unfortunately not. I assume its part management and partly the family.
ALEC HOGG: From an investment perspective, would there be some kind of overhang in the share for a period of time until those holders of Tiber release themselves of their stocks?
ANTON DE GOEDE: I doubt it because as I said, the stock being issued is only five percent of the shares in issue and Growthpoint being such a liquid share: it shouldn't really make a difference in terms of an overhang.
ALEC HOGG: Anton, from your perspective… When Growthpoint had a rights issue earlier this year, where you aware that the money being raised would be used to acquire a company (in particular, or more specifically) – Tiber?
ANTON DE GOEDE: I think Growthpoint has been quite open over the last few months that they are looking at larger portfolios and the market speculation has been out there, that it might be a Tiber portfolio. As we all know, Growthpoint also looked at the assets of Fountainhead, so the likelihood of that also could have happened. There are potentially one or two portfolios still out there to be acquired, so it's not coming to the market as a surprise – not at all.
ALEC HOGG: So they fired all their bullets though, from the current structures. Is it possible that they might still go for Fountainhead, or do you think this one is going to take a while to digest?
ANTON DE GOEDE: No, I don't think that they'll probably go for Fountainhead at this stage. Redefine currently has more than 60 percent of the shareholding if you look at the current offer that we have on the table to take some further Fountainhead shares from shareholders, so Redefine is quite entrenched there now, and the likelihood of Growthpoint going after that is close to zero.
ALEC HOGG: So the Fountainhead fight is over.
ANTON DE GOEDE: Yes, I would say that – yes.
ALEC HOGG: That was Anton de Goede from Coronation Asset Management.