In a public notice last Friday that directors stressed was not an offer or an undertaking to make an offer, RDC Properties’ directors said the group was potentially looking at offering PrimeTime investors 0.6875 RDC units for every one PrimeTime unit they hand over.
RDC is seeking 50 + 1 percent of PrimeTime’s units and will issue at least 91 million new RDC units to cover this, giving a face value for the deal of P218.4 million. The ratio of 0.6875 RDC units for every one PrimeTime unit, is based on the price of the Botswana Stock Exchange (BSE) price of P2.40 for RDC’s units and P1.65 for PrimeTime units as at close of business on June 20.
RDC is also potentially offering PrimeTime unitholders who swap their holdings, a bonus unit issue consisting of one new RDC unit for every four held. The offer is for those unitholders who participate in the potential offer ahead of its closing and would result in a further 189 million new RDC units.
RDC, which has the largest investment property portfolio on the Botswana Stock Exchange at P6 billion, has spent several months engaging major unitholders within PrimeTime on the possibility of making a partial offer directly to them, rather than the board or management. The action, known as a hostile offer, is rare on the local exchange and has raised excitement amongst market watchers.
As the two property firms are listed, they are obliged to make public announcements on the possible offer, a situation that has led to a series of cautionary statements by both sides to investors since February.
This week, giving more details on its intentions, RDC Properties’ directors said the proposed move made sense to both RDC and PrimeTime investors.
“The potential transaction is intended to create a significant real estate player of scale in Botswana, support the ability to accelerate organic growth opportunities and leverage the larger asset management and administrative functions as well as unlock potential cost savings and operational efficiencies of the enlarged group. “The potential transaction is (also) intended to provide immediately improved sector and geographic diversification through the combined group, through greater exposure into the residential and industrial sectors for RDC unitholders, and access to the Croatian market for PrimeTime unitholders,” RDC directors stated.
Directors said the combined portfolio would provide the opportunity to reduce the combined loan-to-value to a targeted level of about 35% over the 12 to 24 months post-implementation of the potential transaction. The potential deal would also improve unit liquidity and unlock net asset value through “the ongoing recycling of non-core or non-strategic properties within the combined portfolio, enhancing the combined portfolio fundamentals and balance sheet flexibility”.
PrimeTime’s board, meanwhile, is pushing back against the proposed transaction, with the group’s chair, Paul Masie, saying the uncertainty created since February was proving detrimental to PrimeTime’s investors.
PrimeTime’s board believes the uncertainty caused by months of behind-the-scenes talks with unitholders, without a substantive offer, has had a bearing on PrimeTime’s share price.
Masie said using a share swap based on the June 20 spot price was highly unusual as most transactions of this nature are based on net asset value per share.
“Using the share price as a value marker is detrimental to PrimeTime unit holders,” he said. “Sentiment drives share price and the company’s shares have been trading under the threat of a takeover for months which surely must have impacted the price.”
Masie further said the proposal for bonus units resulting in the issuance of an additional 189 million RDC shares, would significantly dilute value for PrimeTime unitholders.
“The motive for this hostile bid should be questioned as only a select group stand to benefit from this transaction,” he said.
Masie also questioned the rationale proposed by RDC.
“RDC boasts that the aggressive takeover of PrimeTime will provide its unitholders with greater exposure to the residential and industrial sectors. “How is this possible when PrimeTime has very little industrial assets, and no residential assets whatsoever? “RDC furthermore argues that the transaction will provide PrimeTime unitholders with exposure to Croatia. “Certainly, there are much more attractive investment opportunities in Eastern Europe and other offshore platforms that PrimeTime unitholders could consider and not necessarily the ones that RDC is invested in,” he said.
In its defence, RDC directors said the BSE had granted the necessary approvals to approach several minority unitholders of PrimeTime concerning the potential transaction subject to non-disclosure agreements.
“RDC has sought to approach independent directors of PrimeTime to discuss the potential transaction. “This approach is ongoing,” they stated.
Meanwhile, PrimeTime has said its independent directors had availed themselves for a meeting on June 18, 2024, with Investec Corporate Finance SA, “who purported to represent RDC”.
“Investec did not proceed with the meeting. “PrimeTime is not aware of any special dispensation given to RDC by the BSE to approach its minority unitholders,” PrimeTime directors stated.
