Platz Am Meer shopping centre. Picture: SUPPLIED
Platz Am Meer shopping centre. Picture: SUPPLIED

A takeover bid for Safari Investments by a fund in asset manager Futuregrowth’s stable could potentially scupper a proposed tie-up between the mall owner and its peer, Fairvest Property Holdings. 

Shares in Safari, which owns malls in towns and semi-urban areas, jumped by almost a quarter to a 10-month high on Monday after unlisted Community Property (Comprop) crashed the party with a R1.8bn buyout offer. 

Comprop’s unsolicited offer of R5.90 per share is a hefty 38.5% premium to Safari’s Friday closing price and could mean an end to Safari’s proposed merger with Fairvest Property Holdings.

Keillen Ndlovu, head of listed property funds at Stanlib, said Comprop's offer was about 35% higher than Fairvest’s. 

“The price offered is not easy to counter. This effectively means that the merger is unlikely to go ahead,” Ndlovu said. 

Consolidation is starting to take hold in the listed property sector and fund managers have been calling for small and mid-cap funds to consolidate as they want to invest in larger, more liquid companies able to attract institutional investors. 

Fairvest and Safari had outlined a “friendly merger” in March that would create company with R6bn worth of assets, but it would be surprising if Safari shareholders turned down Comprop's offer, said Old Mutual Investment group fund manager Evan Robins.

“Fairvest will be disappointed. The friendly merger made great strategic sense for them,” Robins said.

Safari’s share price surged as much as 24.4% to R5.30 on Monday, a 10-month high.

JSE-listed Safari owns seven malls in SA and one in Namibia, the Platz am Meer mall in Swakopmund. It also owns a private day hospital in Soweto.

Comprop had purchased and developed 34 shopping centres over the past 20 years, focusing on underserviced communities in rural areas and townships in eight of SA’s nine provinces, Safari said on Monday. The value of the portfolio was estimated at R4.5bn.

Safari’s share price had been under pressure in 2019 ahead of Monday’s announcement, including a 9.68% fall in June.

The company had reported then that while revenue had increased 18.5% to R301m in the year to end-March, expenses rose 48.5%. The company cited a challenging local retail environment that put period rental renewals and escalations under pressure, as it slashed its distribution per share 26.4% to 50c.

While Comprop’s offer was difficult to counter, it did show that despite the challenges and volatility within the property sector, there was value in underlying assets in dominant sectors with the potential to do well, said Stanlib’s Ndlovu. 

It shows that despite the challenges or volatility facing the listed property sector, there is value in the underlying assets if they are dominant, have the potential to do well and are in the right locations, he said.

Safari and Fairvest had announced a proposal earlier in July that would see Fairvest investors exchanging their shares for a stake in Safari, using a swap ratio of 0.45 Safari shares for each Fairvest share.

On Monday, Fairvest’s share price closed 1.02% lower at R1.95, giving the company a market capitalisation of about R1.98bn, compared to Safari's R1.6bn. /With Nick Wilson

gernetzkyk@businesslive.co.za