Growthpoint Properties Ltd. may consider increasing its 10.4 billion-rand ($1.2 billion) offer for Fountainhead Property Trust after the target company entered exclusive talks with a rival South African bidder.
Growthpoint, a Johannesburg-based real estate investment group, made an all-share approach for Fountainhead in October in what Chief Executive Officer Norbert Sasse said would be the country’s largest ever property acquisition. Johannesburg-based Redefine Properties Ltd. had earlier made an all-share offer worth about 10 billion rand at current prices and Fountainhead said last month that after examining both offers it would pursue a deal with Redefine.
A higher offer “could happen,” Sasse said in an interview at the company’s offices yesterday. “It’s not something that we are contemplating right now.” A hostile bid is not “off the table” either, he added. “We are not walking away from Fountainhead.”
Fountainhead rose 1 percent to 8.5 rand a share at the close in Johannesburg, it’s highest level since Jan. 7. About 9.4 million shares were traded, almost five times the three-month daily average. Redefine advanced 1.7 percent to 9.66 rand, the highest since Dec. 20. Growthpoint declined less than 0.1 percent to 25.98 rand.
The acquisition of Johannesburg-based Fountainhead would increase Growthpoint’s exposure to the retail sector, where it is “underweight,” Sasse said. Fountainhead owns or has stakes in several shopping malls in South Africa. The retail and industrial sectors will “remain fairly solid” in 2013 compared with the office market, Sasse added.
“A higher bid from Growthpoint would obviously please Fountainhead unit holders but may not be enough to sway the Financial Services Board, with whom the final word rests as regulator of collective investment schemes in South Africa,” Ian Anderson, chief investment officer at the Durban-based Grindrod Asset Management, said in e-mailed comments. “The deal will be the largest in the listed property sector and would significantly increase the market capitalization of the successful bidder.”
Fountainhead Chief Executive Officer Alex Phakathi didn’t return three messages left by Bloomberg on his office answering machine. The company said in a statement last month it was wary of certain litigation risks surrounding the Growthpoint offer as well as its demand to carry out due diligence.
Growthpoint, which owns half of the V&A Waterfront restaurant and shopping complex in Cape Town, plans to add at least 1 billion rand of new projects to its existing portfolio worth 1.6 billion rand, Sasse said. The focus will be on office blocks along the Gautrain high-speed rail service that links Johannesburg and Pretoria to airports in the Gauteng province. “We have got the sites,” Sasse said. “We are not going to be constructing speculatively.”