Real estate investment trusts (Reits) Delta Property Fund and Rebosis Property Fund have, in-principle, agreed to enter into exclusive merger discussions to affect a potential transaction.
Delta and Rebosis both have a focus on retail and commercial property in South Africa and, as such, the proposed merger represents a natural consolidation of the parties’ shared vision and strategy for the domestic real estate market.
It also represents a mutually beneficial step in unlocking value for shareholders.
It is envisaged that the merger will result in several benefits, including providing scale and diversification in the sector through consolidation of the individual balance sheets of the parties; enhancing the parties’ relationship with the Department of Public Works and Infrastructure and other government entities; and providing scale for restructuring the parties’ balance sheets, particularly as it relates to managing the loan-to-value ratio to an optimal level.
Further benefits include providing for the reduction in capital costs through credit profile enhancement; and bolstering tradability and improving liquidity for shareholders through the creation of a significant player of scale.
The parties will now undertake a reciprocal due diligence, discussions with key stakeholders, finalisation of the transaction structure, and decisions around the new management team and board composition.