Madison unitholders to benefit from Redefine-Spearhead transaction

Posted On Thursday, 27 July 2006 02:00 Published by Commercial Property News
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Linked unit-holders of Madison Property Fund Managers Limited, the first property asset manager in South Africa to be listed on the JSE Limited, are set to benefit from the transaction which should result from Redefine Income Fund Limited’s offer to Spearhead Property Holdings Limited unit-holders to acquire 100% of the Spearhead linked units in issue.

Marc WainerMadison initiated this transaction in March 2006 and after months of complex negotiations, in a volatile market, a formal offer valued at some R1,3 billion has been submitted.

On implementation Madison will ultimately benefit from the enhancement in Redefine’s enterprise value, on which Madison earns its fees, which will increase by approximately R1,5 billion. It will also benefit from a transaction fee.

In order to facilitate the Redefine-Spearhead transaction and as part of Madison’s stated goal of assuring appropriate succession planning, an agreement has been reached with Mike Flax, the CEO of Spearhead, to join Madison as an executive director.

As South Africa’s largest property asset manager Madison derives its income predominantly from the asset management of three leading and highly differentiated listed property funds: Redefine Income Fund, ApexHi Properties Limited and Hyprop Investments Limited. In addition Madison earns transaction based income.

Marc Wainer, executive director of Madison, explains that this is one of three possible deals Madison has been negotiating on behalf of Redefine. “Within the current volatile market embarking on transactions that make financial sense is difficult and this is the only deal that ultimately benefited both sets of unitholders,” says Wainer. He notes that the other two deals became too difficult to consummate with unattractive ratios emerging in the changing market and those discussions have now been terminated.

Wainer explained that the Redefine-Spearhead deal made sense as the share prices of both companies moved in tandem and thus the swap ratios continued to work. He stresses that the deal works particularly well for Redefine in terms of the synergies between the two companies and the substantial cost benefits that will be achieved.

The deal has already gained the support of both boards of directors and has the support of major shareholders. Wainer is confident that the deal will achieve all required approvals.


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