Rebosis and Delta agree to engage in merger talks
Johannesburg – 6 August 2019– The Boards of listed property funds, Rebosis and Delta, have reached an in-principle agreement for the two funds to merge, which will create the largest black-owned and managed entity with assets worth approximately R25 billion, if approved by shareholders and regulators.
Announcing the proposed tie-up, Dr Sisa Ngebulana and Mr Sandile Nomvete, CEOs of Rebosis and Delta respectively, said the transaction would be of significant benefit to all shareholders because the new fund will provide a diverse portfolio of quality retail and office properties, improved liquidity and reduced combined debt. This will, therefore, preserve shareholder value and position the new company for growth when the property market turns for the better.
Commenting on the transaction, Dr Ngebulana says Rebosis has always been adamant that it will only do deals that are of benefit to the shareholders.
“This is one such deal. Its timing is opportune because the market is ready for consolidations as a way of preserving value for shareholders given the decline of value in the sector. This opportunity provides a platform to restructure and optimise the balance sheet and quality of the underlying office lease profile for the merged entity. Furthermore, corporate costs savings from synergies of a combined entity will add further benefit for shareholders,” he adds.
Rebosis will also no longer have to sell some of its mainstay retail assets, in an unfavourable buyer’s market to reduce its debt.
The key objective of the combined fund is to achieve an optimal capital structure with a loan-to-value of below 40% through various mechanisms including ongoing asset disposals, injection of new assets and capital.
The other key objective is to drive lease extensions on the office space in order to achieve a long weighted average lease profile for the merged entity.
“This has been a long time coming. Five years ago, we explored this opportunity and the property sector landscape has since changed, necessitating consolidations. We believe the economies of scale and appropriate capital structure of the combined fund, offers an advantage in the prevailing tough economic climate,” says Mr Nomvete.
The deal will also give Delta shareholders a diversified portfolio inclusive of the retail sector and reduced over-reliance on sovereign-leased properties without having to raise capital for acquisition.
“Both Rebosis and Delta were formed by entrepreneurs who are passionate about property and both have been in the industry for more than 20 years. We believe given our similar culture, history and combined resources, the entrepreneurial spirit that has successfully guided both Rebosis and Delta, will be the driving force behind the new company. We will continue to pay attractive distribution to our shareholders and create ever-improving shareholder value going forward,” concludes Mr Nomvete.