Growthpoint clinches R3bn Paramount deal

Posted On Tuesday, 30 January 2007 02:00 Published by eProp Commercial Property News
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Growthpoint Properties, the largest listed property company on the JSE, said on Friday its takeover bid for the smaller Cape Town-based Paramount Property Fund had been successful.

Norbert SasseIt said it had secured 97,24% of Paramount linked units in issue through its bid to acquire Paramount. The deal is worth about R3 billionn. Growthpoint has assets worth more than R15 billion. It said it would exercise its "entitlement" under the Companies Act to compulsorily acquire remaining Paramount linked units.

When Growthpoint announced its takeover plan last October there were questions about whether listed property loan stock company Redefine Income Fund, holding about 20% of Paramount, would accept.

Redefine said then it was not happy with the offer price, which could be dilutionary for it.

Some analysts thought Redefine would be the spanner in the works for Growthpoint's ambitions and was unlikely to part with its Paramount interests if it did not get a better offer.

Growthpoint, whose linked unit price was trading in the R11 range when the offer was first made, offered existing Para-mount unitholders one new Growthpoint unit for every 1,44 Paramount units. Since then Growthpoint's unit price has risen to more than R13.

Marc Wainer, executive director of Madison, which asset manages Redefine, said "right at the beginning" Redefine believed the swap ratio based on Growthpoint's earnings at the time "did not make sense". Redefine needed Growthpoint's unit price to be R13 for the deal to make sense.

He said that when Growthpoint's unit price increased to more than R13 last week, Redefine was able to place the Growthpoint units it would get as a result of the unit swap with a third party. The deal was now "earnings enhancing" for Redefine.

Growthpoint CEO Norbert Sasse said the firm's assets would rise to about R18bn and market capitalisation would be R14 billion after absorbing Paramount.

"We have more than 97% of the units, which entitles us to compulsorily buy out the remainder, and that is a bit of a process. It will probably be two months before we own 100%," said Sasse.

The transaction would increase Growthpoint's exposure to Western Cape property to about 20% of its total portfolio.

 

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