Redefine takeover will see EPP delisting from the JSE in March

The takeover of EPP by JSE-listed real estate giant Redefine Properties is on track and is set to be finalised in March, when EPP will be delisted from both the JSE and Luxembourg Stock Exchange.

This was confirmed in Sens statements by both Redefine and Polish-focused retail property counter EPP on Tuesday, with the group’s announcing that Redefine’s offer is now unconditional and will close on Friday, March 4.

The share-swap deal, worth around R7.2 billion and first announced in November last year, will see Redefine securing control of EPP. At the time of the initial announcement, Redefine had around a 45% stake in EPP.

Read: Redefine rallies almost 14% to a 20-month high

It is unclear at this stage what Redefine’s controlling stake will ultimately be, as some EPP shareholders still need to decide on the offer. However, EPP is set to become an unlisted subsidiary of Redefine.

“All the conditions precedent to Redefine making a share-for-share offer to acquire all the remaining shares in EPP N.V. not already owned by Redefine [other than those EPP shares owned by IGroup Consolidated Holdings Proprietary Limited and its subsidiaries] at a swap ratio of 2.7 Redefine shares for each EPP share acquired have been fulfilled or waived,” Redefine notes in its Sens.

“Accordingly, the Redefine offer is now open for acceptances by relevant EPP shareholders on an unconditional basis.”

EPP made a similar announcement, advising shareholders that “all conditions precedent to the Redefine offer and delisting have now been fulfilled and the Redefine offer is open for acceptances on an unconditional basis”.

However, EPP also pointed out that its shares on the Johannesburg and Luxembourg stock exchanges are expected to cease trading on Wednesday March 2, while the termination of its listing on both bourses will be effective around March 8.

Expansion

“At a time when growth is constrained for many peers, Redefine is set to expand its asset base and footprint with the takeover of EPP,” Redefine meanwhile points out in a separate pre-close press statement issued on Tuesday.

Read: Redefine returns to paying dividends and makes a surprise offer for EPP

“The transaction received the thumbs up from shareholders in January and the business will be fully integrated into Redefine during the second half of 2022. With all conditions fulfilled, the delisting of EPP is set to take place on 8 March,” it adds.

“This deal is transformative as it [EPP] is Poland’s largest retail landlord and amounts to an estimated R7.2 billion in additional equity for Redefine and adds around R19.7 billion of total assets onto our balance sheet,” says Redefine CEO Andrew König.

“This equates to about an additional 19.8% of shares in issue for Redefine. In the next six months we will be focusing on integrating EPP into our business in a sustainable way that maximises long-term value creation,” he adds.

The EPP takeover offer, which came as somewhat of a surprise to the market when it was first announced in November last year, is set to be one of König’s biggest acquisition moves since becoming Redefine CEO in 2014.

Redefine’s decision to secure a controlling interest in EPP will also give it more say around dividends from the Polish group as well as its gearing or loan-to-value (LTV) levels and operations.

Redefine has been struggling to get any dividends out of EPP over the last couple years due largely to the Covid-19 fallout.

Following the release of Redefine’s 2021 annual results in November, Stanlib listed property analyst Ahmed Motara told Moneyweb that the group’s results did not include any dividend received from EPP.

Primed for growth

“Redefine is now primed for growth after we used the [Covid-19] crisis to reset and refine every aspect of what we do,” comments König.

“We have exited multiple geographies, optimised what we have and positioned every asset for the best possible sustainable capital and income growth prospects, while entrenching ESG [environmental, social and governance] into everything we do,” he adds.

Redefine CFO Ntobeko Nyawo says the integration of EPP will support Redefine’s medium-term growth outlook, while the company’s credit metrics remain “very stable”.

“We have maintained good liquidity thanks to disposals and strong cash generation. We are actually getting to a point where our recoveries are at 103% as we recover Covid-19 deferrals,” he points out.

“The quality of earnings is therefore getting more sustainable, enhancing our ability to build and grow.”

Nyawo says Redefine should achieve a LTV ratio close to 40% in FY2022 based on disposals and earnings generated.

The group is set to release its half-year results to the end of February 2022 in May.