Balwin Properties Limited has received a firm intention offer from a Consortium, including the Public Investment Corporation (PIC), to acquire all eligible shares in the company.
The PIC, which acts on behalf of the Government Employees Pension Fund (GEPF), and others plan to acquire all eligible issued ordinary shares in Balwin for R4.35 per share in cash.
Balwin Properties owns several residential estate developments across South Africa, including the residential developments at the Mooikloof Smart City
The PIC is South Africa’s largest asset manager, with over R3 trillion in assets under management. It primarily manages the pensions of government employees.
The offer values Balwin’s total issued share capital at about R2.26 billion. If approved and implemented, the group’s shares will be delisted from the JSE and A2X.
The offer price represents a 41% premium to Balwin’s volume-weighted average price (VWAP) over the 180 trading days preceding the announcement. The premium on the 90-day VWAP is 35%.
Shareholders representing 163,975,952 Balwin shares, about 63.5% of the scheme shares, have provided their support for the vote, Balwin said.
The consortium comprises the PIC and entities related to the founder investors of Balwin, including CEO Steve Brookes, Balwin Managing Director Rodney Grey, and GRE Africa Ltd, related to Buffet Investments.
These entities are excluded from voting on the scheme and will not receive cash consideration for their Balwin shares under the scheme, but will keep a private ownership stake.
Based on 519,411,852 total Balwin shares in issue and 261,253,473 excluded shares, the maximum cash consideration will be around R1.12 billion.
“Management and the reinvesting shareholders are not taking cash out of the transaction,” said CEO Brookes.
“They are remaining invested alongside the PIC because they believe in Balwin’s platform, its development pipeline and its long-term prospects.”
Going private
The group said that the cash offer addresses value and liquidity issues, allowing shareholders to realise cash value at a premium in a share that has limited liquidity.
It added that the share has traded at a sustained discount to the underlying net asset value (NAV), which reflects the group’s land, construction, sales, bond approvals, transfers, and cash collection.
Balwin listed on the JSE in 2015 to enhance its ability to raise debt and equity finance. However, the consortium believes that being a listed entity is no longer compelling.
On top of the liquidity challenges and NAV discount, the company also highlighted the costs associated with maintaining a listed-company structure.
The business is long-term, capital-intensive and sensitive to the interest rate cycle. Its residential development model involves long-cash conversion cycles.
As the business faces timing and margin variability, it is not always well matched to public-market valuation cycles.
The group said that private capital is better suited to a long-term development pipeline, with support from the PIC and continued management reinvestment, better positioning the group for growth.
The consortium will then use its capital resources, strategic networks and developmental focus to support the group’s growth objectives, while also benefiting from cost savings from delisting.
“Private ownership will better align Balwin’s funding base with the long-term nature of our
development pipeline,” said Brookes.
“We believe Balwin will have the capital stability and strategic support required to strengthen its market position and continue delivering high-quality, environmentally efficient residential developments.”
The group added that the investment aligns with the long-term nature of pension capital from the GEPF and the residential development model, and with the PIC’s development mandate.
