Emira rejects Arrowhead’s advances

Property company Arrowhead is considering its next step following Emira’s rejection of its recent overture.

Johannesburg - Listed property company Arrowhead is considering its next step following the decision by listed Emira to reject Arrowhead’s unsolicited and non-binding expression of interest in acquiring all of the issued share capital of Emira.

Geoff Jennett, the chief executive of Emira, said Arrowhead’s highly conditional expression of interest offer was rejected on the basis that it was not of any benefit to Emira’s shareholders, but believed Arrowhead would come back with another offer.

Mark Kaplan, the chief operating officer of Arrowhead, said on Friday that they had noted the comments by Emira and were considering their next step. Kaplan said this involved assessing what they would do, which may be nothing and leaving the offer as it was or looking at any potential to take it forward. “We haven’t taken any decision on it yet,” he said.

Jennett said Emira’s board took the decision to reject the approach by Arrowhead based on the letter it sent to the company and after it had been analysed by its advisers.

He said they unanimously rejected it entirely on five grounds, including the price and because Emira shareholders would receive Arrowhead scrip, the quality of Arrowhead’s assets, the strategy and because it did not see any benefits for Emira shareholders.

“It’s so far removed from reality to be ridiculous. If it was in the best interests of shareholders, we are for that, but they must not come and try and steal something,” he said.

Jennett said the very low share swop ratio proposed by Arrowhead meant there was no premium to Emira’s current share price and it was a substantial discount to Emira’s net asset value.

He said in terms of Arrowhead’s expression of interest, it proposed offering 1.67 Arrowhead shares for each Emira share, excluding distributions.

Jennett said this valued Emira at R13.94 a share, which was an almost 20percent discount to Emira’s net asset value.

He said Arrowhead was proposing to offer Emira shareholders scrip in Arrowhead, but Arrowhead was not an entity with a quality of portfolio that Emira itself would not invest into.

Jennett said the quality and value of Emira’s assets compared to Arrowhead’s assets was “chalk and cheese”. He added that the expression of interest also did not make sense strategically to Emira, because they wanted to “jettison” their lower grade office asset but this was the space where Arrowhead operated.

“Emira has been strengthening its portfolio composition over the past few years by reducing its exposure to lower grade offices and it continues to rebalance its portfolio to ease its office exposure.

“A transaction with Arrowhead would be completely counter to this strategy and Emira believes that increased exposure to the office market is inappropriate at this time, given the forecast of continuing weakness in the office market,” he said.

Jennett added that Emira also believed there would be limited, if any, synergies between the two companies, their assets or their strategies.

“We are very different businesses, focusing on different sectors of the property market,” he said.

Shares in Emira were up 0.07 percent on Friday to close at R14.70 , while Arrowhead’s shares remained unchanged at R8.60.

BUSINESS REPORT