BR Properties: GP Proposes OPA for up to 100% of shares
GP Investments is offering a takeover bid to buy up to 100% of the shares of BR Properties paving the way for other shareholders at a time when the real estate sector is suffering from high interest rates and amid a significant drop in the size of the company.
In practice, GP will buy out the stake of Adia, the Abu Dhabi sovereign wealth fund which owns about 61% of the company through a fund managed by GP, and the minority shareholders, who make up the floating company. GP proposes to pay R$1.60 per share.
The shares closed today at R$6.07, but this value is expected to drop significantly after the capital reduction proposed last week. BR Properties intends to distribute its cash to shareholders, which will reduce the company’s share capital by 80%, equivalent to R$5.41 per share.
This proposal will be analyzed at the meeting scheduled for January 24. If approved, the shares are worth R$0.66, based on today’s listing. At this price, the GP offer would be a premium of over 140%. GP CEO Antonio Buoncristiano told the Brazil Journal that BR Properties’ assets are undervalued, justifying the manager’s premium.
“This process provides a solution for the company, which will remain very small after the capital reduction, with low free float and possibly no analyst coverage,” he said.
The talks with Adia, which led to today’s proposal, began shortly after BR Properties sold 80% of its portfolio – a group of 12 retail properties – to Brookfield for approximately R$6 billion in May 2022.
“After this sale, we started to think about the future of the company. Several avenues were discussed until we arrived at this solution”, explains Poncristiano. “Adia clearly expressed an interest in leaving and GP was willing to make the offer.” For a takeover to take off, there are a few prerequisites.
The first is to approve the capital reduction at the meeting of the 24th. After that, there will be a new meeting to deliberate on maintaining Novo Mercado. GP Fund will not vote at this meeting, only minority shareholders (the most relevant of which is Vista Capital, which owns 10% of the company).
If BR Properties remains in Novo Mercado, GP will carry out a takeover bid for up to 75% of the share capital (to comply with the rule of maintaining a 25% free float). In this case, if all the shareholders want to sell the shares, there will be a division.
If Novo Mercado’s delisting is approved, the takeover could represent up to 100% of the company’s share capital.
The market is speculating that the natural next step for BR dry properties would be to go private and delist. Last week, company executives admitted it didn’t make sense to keep the capital public, due to administrative and regulatory costs.
The market value of BR Properties after capital reduction is approximately R$360 million. Buoncristiano says the discussion will take place at a later date. “Writing off is about reporting production, which is neither sensible nor attractive in times like the one we are going through now, with so much uncertainty.”
If OPA reaches 100% of the capital of BR Properties, the total value of the offer will be R$742 million, the resources of which will come from GP funds. “We are interested in keeping the company alive and developing assets that will remain in the portfolio after the capital reduction.”
These assets are two logistics warehouses inside São Paulo, as well as a real estate fund for business buildings. Adia will retain 60% of this FII. “The logistics market is attractive in the long term, because e-commerce tends to develop”, explains Poncristiano. But in the short term, it should be complex, with uncertainties about economic activity, inflation and interest rates.