Fountainhead Property Trust (FPT)’s decision to engage exclusively with Redefine Properties Ltd. (RDF) about a takeover is a conflict of interest, said Growthpoint Properties Ltd. (GRT), South Africa’s biggest real-estate investor.
Growthpoint, which made a 10.4 billion-rand ($1.2 billion) offer for Fountainhead in October, last week met with the Financial Services Board and FirstRand Ltd. (FSR)’s First National Bank unit, which is a Fountainhead trustee, about the transaction, said Estienne de Klerk, an executive director at Growthpoint. Redefine owns the company that manages Fountainhead’s properties.
“A conflict of interest exists between the party making the offer and the management company,” De Klerk said by phone from Johannesburg today.
Fountainhead, which owns or has stakes in several shopping malls in South Africa, is the center of what would be the biggest property transaction in the continent’s largest economy. Growthpoint, which owns half of the V&A Waterfront restaurant and shopping complex in Cape Town, wants to improve its retail portfolio. Redefine, which had made an earlier approach to Fountainhead, raised its offer in December.
“We had no influence whatsoever” on Fountainhead’s independent board’s decision, Redefine CEO Marc Wainer said in a phone interview from Johannesburg. “We think our offer is a fair offer. The decision at the end of the day is the unit holders of Fountainhead.”
Fountainhead CEO Alex Phakathi didn’t return two calls.
“The significance and importance of this transaction has necessitated the Registrar having to meet with a number of different interested parties including Fountainhead, Redefine, Growthpoint and FNB,” Jurgen Boyd, the deputy CEO responsible for collective investments at the Pretoria-based FSB, said in an e-mailed response to questions.
The meetings ensure the regulator is aware of issues “including how the conflict of interest, whether perceived or actual, is being addressed by Fountainhead,” he said.
The exclusivity of the talks will expire if a written sale agreement hasn’t been reached by Jan. 31, Fountainhead said in a Dec. 13 statement. An independent committee at the company considered the cost of delays and implementation and risks of any threat of litigation when deciding to hold talks solely with Redefine, it said.
“We believe that the stated litigation as disclosed by the independent committee had an undue influence on their decision to enter into an exclusive” process with Redefine, De Klerk said. “Growthpoint has never threatened any litigation related” to the transaction.
Growthpoint erased an earlier decline, advancing 2.2 percent, the most since Dec. 3, to 25.90 rand at close in Johannesburg, according to data compiled by Bloomberg. Redefine rose 0.8 percent to 9.75 rand. Fountainhead gained 0.7 percent to 8.64 rand, the highest since Sept. 3.
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