Arrowhead Properties says its independent board believes it's in the company's best interest to merge with Fairvest Property Holdings.
In May, the listed landlord first announced that it was in engagements with Fairvest about the possibility of a "single-step merger". So, Arrowhead formed an independent board that assessed the merits of Fairvest's proposal.
On Tuesday, the company said after assessing the potential merits of a transaction, the board strongly believed that the merger was the best route.
"Arrowhead's appointed independent board has determined that it is in the best interest of Arrowhead and its shareholders that the Company engage with Fairvest in relation to a merger." The company said the board was firmly of the view that a merger that creates a single, larger, more liquid real estate investment trust would unlock the value in the company as opposed to Fairvest acquiring Arrowhead as its subsidiary.
"Accordingly, the company has begun engagements with Fairvest. On the basis of these engagements, it is considered likely that agreement will be reached between the parties on the way forward," continued Arrowhead.
Arrowhead has R9.3 billion worth of properties in the retail, office and industrial space. Fairvest, on the other hand, has 42 commercial properties, currently valued at R3.16 billion. It owns a lot of high-street retail buildings and convenience centres in low-income areas and rural towns.
Fairvest has already been in conversation with some shareholders to acquire 50.1% of Arrowhead's B-ordinary shares in exchange for Fairvest shares – a merger through a share swap.
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