Investors, on Tuesday, bought 1.9 million shares of ILAM Fahari I-REIT worth Sh18.2 million, positioning themselves to reap from an offer to buy out retail investors in the property fund for Sh11 per unit.
The proposed transaction was announced before the market opened on Tuesday, driving up demand for the shares, which changed hands at a range of between Sh6.62 and Sh10.
The prices at which the investors bought the shares on Tuesday still leave them with an opportunity to profit from selling their holdings to the buyer –ICEA Lion Asset Management Limited.
The fund’s share price gained an average of 59.6 percent on Tuesday to close at Sh9.58, setting a new 52-week high.
Investors have a small window of opportunity to exploit differences between market prices and the buyer’s offer.
The buyout offer, in which ICEA Lion plans to buy a total of 36.58 million units, will open on September 6 and close on October 6.
Only investors on record as of September 1 will be eligible to participate in the offer, which will ultimately lead to the delisting of the real estate income trust.
The offer price was an 83.3 percent premium to Fahari’s closing price of Sh6 on the day preceding the announcement.
The partial buyout is designed to restrict the fund’s owners to high-net-worth individuals and institutions who can support it to scale up its operations, the REIT manager said.
ICEA Lion acquired five million shares of Fahari in 2021, giving it a minority stake of 2.7 percent. The offer it has made, if successful, will lift its ownership to 22.9 percent.
Fahari’s share price had languished since its listing in November 2015, trading far below its book value amid weak earnings that have seen its return on net assets stuck in single digits.
ICEA Lion says it explored various options to improve the performance of the property fund but they could not be implemented in the current context of a low share price and the presence of retail investors unwilling to inject new capital via a rights issue.
