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Fahari to block trading for those snubbing buyout
ILAM Fahari I-REIT Chief Executive Officer Raphael Mwito (left), Dyer and Blair Investment Bank Director Cynthia Mbaru (centre) and ILAM CEO Einstein Kihanda during a media briefing on the proposed conversion of ILAM Fahari I-REIT from an unrestricted I-REIT into a restricted I-REIT and redemption offer at Radisson Blu, Nairobi on September 4, 2023. PHOTO | LUCY WANJIRU | NMG
Retail investors in ILAM Fahari I-Reit will not be able to trade their holdings in the property vehicle if they decline to sell and the fund is delisted from the Nairobi Securities Exchange (NSE).
The small investors will be bundled into a single nominee account which they will not be able to exit but through which they will retain other rights like receiving their proportionate cash distributions (dividends).
Other investors with holdings valued at Sh5 million or more will be able to trade with one another on the over-the-counter (OTC) market once Fahari exits the NSE.
“Upon delisting, the ILAM Fahari I-Reit shall be converted into a restricted Reit and by operation of the Reit Regulations, the holding and trading of the units (shares) shall be subject to the prescribed minimum value of five million shillings,” reads the fund’s offering memorandum.
“The implication of this is that non-professional investors shall be restricted from trading units.”
ICEA Lion Asset Management, which manages Fahari, has proposed to buy up to 36.5 million units from retail investors and delisting the fund from NSE’s main investment market segment.
It has offered a price of Sh11 per unit which represented an 83.3 percent of the market price of Sh6 prior to the material disclosure which was made on August 29.
The offer period to the minority investors opened on Wednesday last week and will run until October 6.
A significant part of the units that ICEA was targeting were bought in the open market in the wake of the buyout news as investors positioned themselves to benefit from the offer.
Investors bought a total of 24.2 million shares of ILAM Fahari I-Reit worth Sh213.2 million in the four trading days to September 1.
The units, amounting to 66 percent of the 36.5 million that ICEA Lion plans to buy, were purchased at an average price of Sh8.79 according to market data.
Including transaction charges, the investors’ cost per share settles at about Sh9.
That still leaves them with an opportunity to book a gain of 22.2 percent if they sell to ICEA Lion which will only buy units from investors on record as of September 1.
According to the offering memorandum, retail investors can choose to accept the buyout offer or acquire additional units to graduate into professional investors.
The property fund’s shares will be suspended from trading between the close of the offer period on October 6 and October 25.
