RMH marriage to Atterbury going nowhere slowly

There seems to be no solution in sight to the disagreement between RMB Holdings (RMH) – previously a major holding company with interests in leading financial groups like FirstRand, Rand Merchant Bank, Discovery, OUTsurance and a portfolio of property holding companies – and Atterbury Property Holdings (Pty) Ltd, which happens to represent the bulk of RMH’s property interests.

RMH and Atterbury still seem to like each other in the way they used to when they first tied the knot in July 2016, but shareholders are pushing for a divorce to cash in on the spoils.

RMH needs to cash in its Atterbury shares and get it to settle a R487 million loan to Rand Merchant Bank. RMH provided a guarantee for the loan.

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The loan was repayable to Rand Merchant Bank this week, but Atterbury already announced months ago that the loan agreement makes provision for the loan to be settled by issuing more shares to RMH, rather than settling the debt in cash.

Thus, Atterbury opted for the equity option and refused to hand over a cheque.

RMH announced on Monday that it honoured its guarantee to the bank and settled the debt.

In a virtual presentation to shareholders, CEO Brian Roberts confirmed that RMH settled the loan to Rand Merchant Bank – via subsidiary RMH Asset Holding Company (RMHAH) – and, on payment under the guarantee, “assumed all the rights” of the lender under the original loan agreement.

“As of close of business on Friday, 7 July 2023, RMHAH is the lender as defined in the facility agreement,” according to the formal announcement.

“As a consequence of RMBH having declined to pay under the RMBH guarantee, on 10 July 2023, RMHAH exercised its right to decline the offer from Atterbury to repay the loan amount outstanding by the issuance of shares and demanded an amount of R487 million from Atterbury as of 10 July 2023.”

Not on the same page

However, Louis van der Watt, founder and CEO of Atterbury, disagrees.

He confirmed to Moneyweb that Atterbury opted to settle the loan in shares rather than cash. “We will proceed to issue shares,” he says, adding that the agreement makes provision for this.

“To clarify, when RMH first invested [some R1 billion] in Atterbury in 2016, the investment comprised of taking equity and a loan portion. At the time, the intention was to convert the loan to equity when due, as is often the case. The agreement – including the guarantee from RMH to the bank – was structured to satisfy Rand Merchant Bank, but never to enforce payment in cash.

“Since then, RMH changed its strategy when the original majority shareholders in the then Rand Merchant Bank Holdings decided to unbundle the assets and ‘cash in’.

“Atterbury remains a long-term property development company and will continue to operate as such.

“The change in strategy at RMH – one of our shareholders – will not force us to change our strategy or force us to sell properties at the wrong [time] to settle a loan,” says Van der Watt.

“The spirit and purpose of the original agreement was to convert the loan to equity.”

RMH currently owns 27.5% of Atterbury, comprising more than 60% of its assets.

Accepting shares in lieu of cash will increase RMH’s stake in Atterbury to around 43% and make it even more important in RMH’s portfolio.

Valuation

RMH reiterated the reasons it prefers cash. The most important is that it would rather sell the 27.5% of Atterbury it currently owns because its stated strategy is to “monetise” all the assets and pay the proceeds to shareholders.

Another reason is that the value of the shares will include more than just the value of the Atterbury properties – it will include the value of the Atterbury property development and management company as well.

“RMH will be paying a premium,” says Roberts, although he adds that there is no disagreement between RMH and Atterbury about the valuation of the shares.

The third reason is a legal obligation to ensure that RMH is doing the right thing and looking out for the rights of its shareholders.

Respect

Moneyweb asked RMH and Atterbury if the dispute affects their working relationship, considering that RMH is a major shareholder in Atterbury and the importance of Atterbury to RMH.

Curiously, both Roberts and Van der Watt replied that things are working well.

“RMH is very happy with Atterbury as an investment. It is a good investment, a good asset.

“If you ask me if it is an investment I want to be in, the answer will be yes,” says Roberts.

“It is a solid business with good prospects.”

Van der Watt says he has the utmost respect for Roberts: “He sits on the Atterbury board and is a member of our investment committee, as well as other committees. He is a great guy. He just inherited this difficult situation.”

Neither party wants to speculate on the outcome of the spat. Van der Watt says he is running Atterbury with a long-term view, as “I have done for the last 30 years”.

“If RMH wants to sue us, so be it,” he says.

Roberts says converting the loan to equity will benefit Atterbury by reducing its gearing – at a discount due to the valuation of the Atterbury shares.

Dissenting shareholders

Meanwhile, RMH announced that it reached an agreement with some of its shareholders who were unhappy about the price at which RMH sold its interest in Atterbury Europe.

“Pursuant to Section 164 of the Companies Act no.71 of 2008, RMH has concluded a repurchase agreement with certain shareholders holding an aggregate amount of 5.5 million,” it said in a separate announcement on Tuesday.

In terms of the agreement, RMH will repurchase the shares at just less than R1.98 per share.

Two other shareholders (collectively owning nearly 13.3 million shares) have launched court actions.

This article originally appeared on Moneyweb and was republished with permission.
Read the original article here.

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