Texton: Pre-Brexit, the PIC must have thought it a gimme
But nobody’s laughing now. The property fund may have great UK assets, but its share price doesn’t agree
SA’s biggest asset manager, the Public Investment Corporation, recently increased its holding in property fund Texton to 18.9% from 5.2%. The move prompted Texton management to claim this was a vote of confidence in their company. They can’t be serious.
Does the Texton board not realise the PIC was not a willing buyer of the 13% stake in Texton? It was merely claiming the security it demanded from BEE shareholders in 2014 when it funded their investment in Texton, which was trading at R11.40 at the time. The share is now trading at R4.17.
In terms of the five-year old financing arrangement, the PIC believes Texton is now obliged to buy back that chunk of shares at the same R11.40 price.Presumably in the pre-Brexit days of 2014 Texton’s property portfolio, which includes well-placed UK assets, was attractive enough to persuade the BEE investors to accept the PIC’s unusually tough financing terms – chief of which involved the surrender of the shares. The PIC contends part of this funding arrangement includes an agreement with the company that it will repurchase the 13% stake at the same R580m it paid to back the BEE investors. At its current share price the block of shares is worth around R200m.
In late December 2018 Texton shareholders voted whether or not to proceed with the repurchase. Unsurprisingly they voted overwhelmingly not to approve it. Which is why Texton currently does not have a BEE shareholder and the PIC is stuck with an 18.9% stake in the company.It’s difficult to see this as a vote of confidence. More likely is that the PIC is contemplating whether or not to take legal action to force Texton to honour an agreement the PIC believed it had with the company.