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Transcend Property Fund, which listed on the JSE in 2016, has received a board-backed buyout offer from majority owner Emira Property Fund at about a 25% discount to its net asset value per share.
Emira, which owns just over 68% of Transcend, has offered R6.30 per share, the group said on Friday, in contrast to its opening share price on Friday of R6.39. Transcend also had a net asset value per share of R8.23 at the end of its 2023 year, but shareholders would also get a clean-out distribution which won't reduce the scheme-consideration price.
Valued at about R1 billion on the JSE, Transcend’s portfolio consists of relatively new modern apartments located in secure estates. It had a portfolio of 22 properties valued at about R22 billion at the end of March, more than 82% of which was located in Gauteng by value, with the rest in the Western Cape.
Transcend said on Friday its ability to meet its objectives of access to institutional capital and growth has been hampered by the lack of investment appetite for small, illiquid counters. Smaller companies on the JSE often struggle to retain interest of institutional investors, and in late June, specialist day-hospital operator Advanced Health also announced its intention to delist for the same reason.
"In addition, Transcend Shares trade at a discount to their underlying net asset value, which results in any capital raise at market value being highly dilutive to existing Transcend Shareholders," it said on Friday.
"Under these circumstances, the board of directors of Transcend and Emira believe that Transcend’s continued listing on the JSE is not justified and that the limitations imposed by the regulatory processes and costs associated with a JSE listing outweigh the benefits thereof in the current environment.
"The Transcend Board has therefore resolved to propose the scheme to provide Transcend shareholders with the ability to realise their investment in Transcend at a price that represents, in its view, fair value."
A circular, including an independent expert's opinion on the offer, Valeo Capital, is expected to be released on 14 September. Excluding Emira, shareholders accounting for just over 58% of its shares have given irrevocable undertakings to vote in favour of the scheme.
