Property investment firm Daejan Holdings (DJAN) will be taken over completely by its founding Freshwater family after offering £80.50 per share to other investors. The deal values the FTSE 250 company at just over £1.31bn, a 56% premium to yesterday’s £51.70 closing share price.
Daejan’s share price today soared close on 55% to £79.90 ion response.
Shaftesbury Avenue-headquartered Daejan was founded by the Freshwater family after the Second World War. It owns residential and commercial properties in the UK and on the east coast of the US worth about £2.5bn, including Africa House, the Grade II Listed mixed-use building on the Kingsway in Central London.
PROFITABLE EXIT OPPORTUNITY
The Freshwater Group, which represents the family’s interests, currently owns 79.5% of the shares, and today’s offer will give owners of the rump 20.5% of the stock the chance to exit at a share price higher than at any time since the early 1990s. The stock peaked at £69.90 in May 2017.
Africa House, on London's Kingsway
‘The offer represents an opportunity for shareholders to realise in cash their investment in Daejan at a premium of approximately 56% to the prevailing share price and I intend to recommend shareholders to vote in favour of the offer’, said Solly Benaim, independent director of Daejan.
The Freshwater Group, and no doubt all shareholders, has become increasingly frustrated with the chasm that has opened up between net assets (NAV) and the share price.
VALUATION CHASM
Today’s statement spells out that the reported NAV per share had increased by approximately 59% from £75.54 to £119.85 in the five years to 20 February 2020. Yet the share price has consistently struggled to keep pace, declining by roughly 12% over the same time frame.
Part of the reason for this stretched valuation gap is the Daejan’s modest dividends. Last year to 31 March 2019 the company paid dividends worth £16.8m, implying a modest 1.7% yield, way below the 5% to 6% average of the UK real estate sector.
Daejan has also struggled for liquidity given the size of the Freshwater stake, while the founding family’s orthodox Jewish beliefs have courted gender equality controversy.
Shareholders are expected to vote on the deal in April.
