MONEYWEB / 07 JANUARY 2019 - 00.17 / SUREN NAIDOO
Trust’s obligation to buy back the shares ‘null and void’, says new CEO.
The majority of shareholders in JSE-listed Texton Property Fund have voted against buying back shares in the group from the Public Investment Corporation (PIC) after a BEE consortium funded by the PIC defaulted on its loan.
This is now a matter for the PIC to deal with, says Texton CEO. Picture: Moneyweb
A general meeting of shareholders to vote on the matter was held on December 28, after the PIC opted to call in the loan by exercising a ‘put option’. This meant Texton had to buy back the shares from the BEE consortium.
However, in a JSE SENS announcement on December 28, Texton said the requisite majority of shareholders did not pass the resolutions required to approve the repurchase. It said following the process, and legal advice, the board was of the opinion that Texton’s obligation to implement the repurchase in terms of the PIC Put Option Agreement had come to an end as the conditions to which it was subject had failed.
‘Released from all liability’
“The company is thus released from all liability to the PIC in terms of the PIC Put Option Agreement,” it declared in the SENS statement. On the day its share price was up more than 12% to R4.80, however it has lost a bit of ground, closing at R4.60 on Friday (January 4).
Speaking to Moneyweb on Friday, Texton CEO Marius Muller explained that while the diversified real estate investment trust (Reit) was obliged to buy back the shares as part of the BEE deal, this was subject to approval from a majority of shareholders.
“We followed due process and a decision has been made by the majority of shareholders not to repurchase the BEE shares,” he says. “Since the majority voted no, we believe that Texton’s obligation to buy back the shares is null and void. We may see the PIC taking the legal route, but it is now a matter for the PIC to deal with.”
He adds that Texton has been working with shareholders and the PIC to sort out the matter. “It is the last legacy issue that we want settled in order to take the company forward under its new leadership and to regain lost value. With the vote done, we believe that this adds some level of certainty, but we have a long, hard road ahead to rebuild the company.”
Share price dive
Muller says the BEE deal was put together under former CEO Rob Kane in 2014, with the BEE consortium led by Romeo Makhabela. At that stage Texton’s share price was around R11.70. When the vote to repurchase the BEE shares took place on December 28, Texton’s share price was around R4.10.
The BEE deal back in 2014 was valued at R580 million, while the PIC loan to the consortium was valued at almost R670 million by November last year. However, with Texton’s leadership woes, poor performance and share price rout in the last few years, the rand value of the consortium’s BEE stake as at November last year declined to around R213 million.
“The Texton broad-based empowerment special purpose vehicle has around a 13.7% stake in Texton Property Fund,” says Muller. “Besides the loan to the BEE consortium, the PIC has around a 5.2% stake in Texton. We will have to see what the PIC does now, but we can’t have uncertainty as they effectively have a 19% stake in Texton.”
Clearer strategy in the works
Muller says his priority now is to bring down Texton’s debt levels, and together with new group chairman Marcel Golding, to revisit Texton’s strategy. Texton’s loan-to-value (LTV) ratio as at June 30, 2018 stood at 55.4%. However, exclude the PIC Put Option liability, and its LTV comes in at 42.7%.
Muller says the UK will remain part of the group’s plans, but in South Africa the idea is for Texton to focus on secondary commercial nodes in the country’s major cities in Gauteng as well as Cape Town and Durban. He says it is still early days, but a clearer strategy for Texton is in the works.
Muller, who became acting CEO in September, was appointed permanent CEO last month, the announcement coinciding with that of Golding as the group’s new chairman. Golding owns a 17.6% stake in the group.
LINK : https://www.moneyweb.co.za/news/companies-and-deals/texton-shareholders-vote-against-bee-share-buyback-from-pic/
Disclaimer - The views expressed here are not necessarily those of the BEE CHAMBER