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Did Marriott miss boat on SA Retail?

Posted On Thursday, 09 June 2005 02:00 Published by eProp Commercial Property News
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The general market view is that listed property loan stock company Hyprop Investments’ hostile takeover bid for SA Retail Properties will succeed.

Angelique de RauvilleHyprop has said it has the support of most SA Retail unitholders for its takeover plans.

Various property analysts also agree Hyprop’s offer of R8 in cash for every SA Retail unit, or one Hyprop unit for every 2,7 SA Retail units, is an attractive one that SA Retail unitholders will probably accept.

The question now is whether SA Retail, which is managed by property group Marriott — or Marriott, for that matter — could have done anything to stop this situation from arising.

Some analysts say that if SA Retail and listed property unit trust Martprop, also managed by Marriott, had merged into one fund, a takeover bid may not have been on the cards.

Others say that although a merger is not a guaranteed protection from takeovers, such a move would have pleased SA Retail’s unitholders because it would have reduced costs and increased its liquidity.

Shortly before Hyprop unveiled its takeover bid at the end of March, SA Retail and Martprop announced a proposed deal in which they would co-own each other’s retail properties.

The market saw this as a defensive move to prevent Hyprop’s takeover bid because in the event of a third party wanting to strip out assets from SA Retail, Martprop would have had a pre-emptive right to them.

This proposed transaction has since been scrapped by SA Retail and Martprop.

Colin Young, property sector head at Old Mutual Asset Management, says if SA Retail and Martprop had merged the takeover "would not have been happening". He says: "SA Retail is not the most liquid fund, and a merger would have made it more liquid because Martprop is liquid."

SA Retail unitholders wanted a merger, and by not doing this SA Retail played into Hyprop’s hands, he says.

Angelique de Rauville, MD of listed property portfolio management company Provest, says a takeover of SA Retail has serious implications for Marriott as SA Retail forms a significant portion of its assets under management.

De Rauville says, however, that any listed company is vulnerable to a hostile takeover, and there was no guarantees a merger of SA Retail and Martprop would have prevented it.

She also says the fact that Marriott manages four independent listings — Namibian-listed Oryx, South African-listed Martprop, SA Retail and Ambit — is advantageous as a takeover of SA Retail does not affect the other companies it manages.

But if SA Retail and Martprop had merged, it would have satisfied many of their unitholders, as well as analysts, who had been calling for a merger.

A merger would have reduced costs, increased liquidity and dealt with the "inherent conflict of interests" that arose because both funds were acquiring the same properties and jointly investing in others, she says.

Catalyst Securities MD Andre Stadler says a merger would have made sense for unitholders of both. It would have solved SA Retail’s liquidity issue by increasing the spread of unitholders. It also would have given SA Retail a chance to remove the off-balance sheet debt funding through its Whirlprops structure.

Whirlprops was originally owned by Marriott, Nedbank and BoE, and owns units in the place of debt.

Last modified on Wednesday, 07 May 2014 11:02

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