Shareholders approve Fortress’s simplified share structure

JSE-listed property company Fortress has received the go-ahead from shareholders to implement its scheme of arrangement (SoA) proposal, which will simplify the company’s dual share capital structure – consisting of A and B shares – into a single class of ordinary shares.

Fortress informed the market of the development in a Sens announcement on Friday, noting that it had received “overwhelming shareholder support” for the proposal.

“We are grateful to our shareholders for their overwhelming support of the proposed transaction to simplify our capital structure. We have consistently emphasised the importance of simplification and specialisation. This vote represents a major step forward for Fortress in this regard,” CEO Steven Brown said.

Fortress’s share price gained close to 5%, rising to R15.19 during early morning trade on Monday, following Friday’s announcement.

Fortress has been looking for avenues to simplify its share structure for some time, but this success stems from the SoA, which was proposed to the market in October 2023. The scheme will see the repurchasing and cancelling of all FFB shares in issue, with shareholders getting Nepi Rockcastle shares in return.

Shareholders have agreed to a share-swap ratio of 0.060207 Nepi Rockcastle shares per FFB share.

Fortress management believes the single-class structure of ordinary shares will help improve liquidity, allow for dividends to start flowing through and allow greater ease for corporate actions.

Fortress’s complex share structure has proven troublesome for the firm in recent years. In January last year, the company lost its real estate investment trust status (Reit) on the JSE after failing to submit the necessary Reit declaration to the bourse in line with listing requirements.

However, in a conversation with Moneyweb’s Simon Brown last year, the CEO said he believed the success of the SoA could help the company win back its Reit status on the JSE.

Read: JSE revokes Fortress’s Reit status, property group says

“This single-share structure has a host of benefits, most notably the ability to unlock value as well as to attract investors with a vanilla single-equity share which will be liquid and currently trades at a significant discount to its net asset value of approximately 40%.

“While our shareholding in Nepi Rockcastle will reduce, we will remain their largest shareholder with an investment of circa R13 billion in a high-quality, offshore business which remains a powerhouse in Central and Eastern Europe. The scheme of arrangement has truly been a collaborative effort between shareholders and Fortress in collectively finding a suitable solution to a complex structure,” Brown added.

Looking forward to the rest of 2024, the property company says it will continue actioning its long-term strategy of capital recycling, which will see the disposal of “older, under-performing properties” to fund new more attractive developments.

“Our focus remains on completing new developments and letting of premium-grade logistics real estate in South Africa and Central & Eastern Europe, as well as expanding our convenience and commuter-oriented retail portfolio. At Fortress, our focus on total returns over the long term will continue to drive our investment and capital allocation decisions,” Brown said.

Simon Brown discusses the share simplification class structure with CEO Steven Brown: