L2D Soars 40% Following Liberty Group's Buyout Offer

Liberty Two Degrees (L2D), a JSE-listed real estate investment trust (REIT) and part-owner of Sandton City, made headlines on Thursday when the unlisted Liberty Group announced its intention to acquire L2D’s minority shareholders. This strategic move boosted L2D’s share price by more than 40% in morning trade, as investors reacted positively to the potential consolidation.

Liberty Group, as part of the banking conglomerate Standard Bank Group, owns a significant stake in L2D, which owns approximately 25% of a valuable portfolio of iconic retail and hospitality assets in South Africa. Coronation is currently another notable shareholder in L2D’s portfolio.

Following the proposed buyout by Liberty Group, L2D will become part of the larger Standard Bank Group and will be delisted from the JSE’s main board. According to a statement released by the REIT, the offer price of R5.55 per share represents a significant premium of 46.4% over L2D’s volume-weighted average price over the last 30 days.

Amelia Beattie, CEO of L2D, expressed excitement about the opportunity to add value to the larger Standard Bank Group. She emphasised that the consolidation is an important step in L2D’s value creation journey, with the goal of creating experiential spaces that will benefit future generations. L2D believes that by operating within a larger organisational context, it can generate additional value for stakeholders.

Yuresh Maharaj, CEO of Liberty Group, commented on the proposed transaction, highlighting its potential to unlock significant value for L2D shareholders while taking into account the interests of other stakeholders. Both companies involved in the transaction have strong property legacies, making the consolidation a promising prospect.

While this acquisition was not entirely unexpected in the sector, it comes at a time when the majority of JSE-listed REITs are trading at significant discounts to their Net Asset Values. Nonetheless, L2D assured investors that its independent board followed due process in evaluating Liberty Group’s offer, including complying with takeover regulations and seeking advice from external financial advisors and independent experts.

L2D commissioned an independent expert report, which concluded that the scheme’s terms, including the offer price, were fair and reasonable for L2D shareholders. This assessment strengthened the board’s recommendation that the buyout be approved.

Subject to regulatory approvals and other customary closing conditions, the transaction is expected to close by the end of 2023. Once completed, the merger will combine Liberty Group’s formidable real estate assets, which include some of South Africa’s most iconic and high-quality properties, with L2D’s extensive retail and hospitality portfolio.

Apart from Sandton City, L2D’s joint assets with Liberty Group, Pareto, and Amdec Group in Johannesburg include the Eastgate Shopping Centre complex, Nelson Mandela Square, Sandton Sun Hotel, Sandton Towers, Garden Court Sandton City, and Sandton Convention Centre. The Melrose Arch precinct in Johannesburg is co-owned with Amdec Group, and L2D’s holdings in Cape Town include the Liberty Promenade Shopping Centre and a Century City office building. Liberty also owns regional properties in Umhlanga Ridge (Durban), Pietermaritzburg’s Liberty Midlands Mall, Richards Bay’s John Ross Eco-Junction Estate, and Bloemfontein’s Botshabelo Mall.

L2D debuted on the JSE in December 2016 as a property counter focused on precincts and retail. It began as a property collective investment scheme before converting to a corporate REIT and renaming itself Liberty Two Degrees Limited on November 1, 2018.

Finally, Liberty Group’s buyout offer has caused a surge in L2D’s share price, presenting an exciting opportunity for both entities to consolidate their real estate assets and increase shareholder value. Investors and industry experts will be closely monitoring developments in the South African property sector as the transaction progresses.