Balwin Properties Limited has received a firm intention offer from a Consortium including the Public Investment Corporation, acting on behalf of the Government Employees Pension Fund, together with Balwin founder investors to acquire all eligible issued ordinary shares in Balwin for R4.35 per share in cash.
The offer values Balwin’s total issued share capital at approximately R2.26 billion and gives eligible shareholders the opportunity to realise cash value at a premium to recent trading levels.
If approved and implemented, Balwin will become a wholly owned subsidiary of
Balwin will become a wholly owned subsidiary of Bidco, and its shares will be delisted from the JSE and A2X.
Bidco is a newly established South African private company, incorporated for the purpose of implementing the Proposed Transaction. Bidco is wholly owned by Volker Holdings Proprietary Limited (Volker), an entity controlled by Stephen Volker Brookes (the chief executive officer of Balwin).
If the deal is approved Balwin will be a wholly owned subsidiary of Bidco; and its shares will be held in approximately the following proportions:
- Volker: 33.6%;
- Rodna: 9.6%;
- GRE Africa: 7.5%; and
- GEPF (represented by the PIC): 49.3%.
The offer price represents a premium of 41% to Balwin’s volume-weighted average price (VWAP) over the 180 trading days prior to the announcement, which is the most appropriate measure for illiquid stocks. The premium on the 90-day VWAP is 35%.
Shareholders holding 163,975,952 Balwin shares have provided irrevocable support to accept or vote in favour of the offer, representing approximately 63.5% of the scheme shares.
Reinvestment by founder investors, excluded from voting on the transaction
The Bidding Consortium comprises the PIC, acting on behalf of the GEPF, and entities related to the founder investors of Balwin, including CEO, Steve Brookes, Balwin Managing Director, Rodney Gray, as well as GRE Africa (Pty) Ltd, related to Buffet Investments.
These entities are excluded from voting on the Scheme of Arrangement and will not receive a cash consideration for their Balwin shares under the scheme but will remain invested alongside the PIC through the proposed private ownership structure.
Based on 519,411,852 total Balwin shares in issue and 261,253,473 excluded shares, the maximum number of shares to be acquired under the scheme is expected to be 258,158,379 shares, implying maximum cash consideration of approximately R1.12 billion payable to eligible shareholders.
“This transaction brings together long-term domestic institutional capital from the PIC, acting on behalf of the GEPF, with the continued commitment of Balwin’s founder-management and other significant existing shareholders. Importantly, management and the reinvesting shareholders are not taking cash out of the transaction,” Brookes said.
“They are remaining invested alongside the PIC because they believe in Balwin’s platform, its development pipeline and its long-term prospects.”
A cash offer that addresses value and liquidity
The offer gives eligible shareholders the opportunity to realise cash value at a premium in a share that has had limited liquidity and has traded at a sustained discount to underlying net asset value.
Balwin’s reported NAV per share remains materially above the offer price, but that NAV is embedded in a long-dated development platform where value is realised through land development, construction, sales, bond approvals, transfers and cash collection, rather than being immediately available as distributable cash.
For eligible shareholders, the transaction also addresses a practical liquidity issue. Balwin’s shares have traded in modest volumes for an extended period, making it difficult for larger shareholders to exit meaningful positions through the market without execution risk. The offer provides immediate cash settlement and certainty of value, while allowing the business to continue investing for long-term growth under private ownership.
Why the listed structure no longer fits Balwin
Balwin listed on the JSE in 2015 to enhance its ability to raise debt and equity finance and to provide shareholders with access to a platform on which Balwin shares could be traded.
The Bidding Consortium believes that the listing is no longer as compelling, given the limited liquidity in Balwin shares, the discount to underlying net asset value at which the shares have traded, and the costs associated with maintaining a listed-company structure.
Balwin’s business is long dated, capital intensive and sensitive to the interest rate cycle, which affects affordability, mortgage appetite, buyer conversion and the pace at which sales translate into cash.
Its residential development model involves long cash-conversion cycles, multi-year inventory build-up, ongoing working-capital requirements, municipal dependencies, infrastructure constraints and input-cost volatility. These factors can introduce timing and margin variability and are not always well matched to public-market valuation cycles.
Private capital better suited to a long-term development pipeline
The Bidding Consortium believes private ownership, supported by long-term institutional capital from the PIC on behalf of the GEPF, continued founder-management reinvestment and the participation of other significant existing shareholders, will provide a more appropriate ownership structure for Balwin’s next phase.
The Consortium intends to leverage its capital resources, strategic networks and developmental focus to support Balwin’s growth objectives, while realising cost savings attributable to the delisting.
“Private ownership will better align Balwin’s funding base with the long-term nature of our development pipeline.,” Brookes said.
“With the support of the PIC, founder-management and our reinvesting shareholders, we believe Balwin will have the capital stability and strategic support required to strengthen its market position and continue delivering high-quality, environmentally efficient residential developments.”
PIC/GEPF participation brings long-term domestic institutional capital
The PIC’s participation, on behalf of the GEPF, brings long-term domestic pension capital into a residential development platform with established scale in South Africa. The PIC acts as asset manager for the GEPF and invests funds on behalf of the fund in line with client mandates.
The investment is aligned with the long-term nature of pension capital and Balwin’s long-dated residential development model. It is also consistent with the PIC’s broader developmental-investment mandate focused on having developmental impact, including job creation and enterprise development.
This is particularly relevant for a residential development business whose performance is closely linked to the interest-rate cycle, mortgage affordability and multi-year development delivery, where long-term capital can support the business through cycles rather than requiring short-term market rerating.
Independent process and remaining approvals
Balwin’s independent board has appointed Valeo Capital Proprietary Limited as independent expert to review the terms of the scheme. In its preliminary draft report, Valeo Capital has indicated that the terms of the scheme, including the scheme consideration, are fair and reasonable to Balwin shareholders. The independent expert report and the opinion of the Balwin independent board will be included in the scheme circular.
The funds required to settle the maximum possible scheme consideration are in place. The Bidding Consortium has obtained and delivered to the Takeover Regulation Panel an irrevocable confirmation of funds held in escrow in respect of the maximum consideration.
The proposed transaction remains subject to the fulfilment or waiver, where applicable, of a number of conditions, including shareholder approvals, relevant third-party consents, competition authority approval, other regulatory approvals and the issue of a compliance certificate by the Takeover Regulation Panel.
Full details of the scheme, including the final salient dates and times, will be set out in the circular to be distributed to Balwin shareholders.
YW Capital acted as corporate finance advisor to Balwin Properties on the transaction.
