The Board of Directors of Fortress Real Estate Investments Limited has announced the proposal of a scheme of arrangement between the company and its FFB shareholders. If approved by shareholders, the implementation of the scheme would see Fortress’ dual share capital structure simplified into a single class of ordinary shares which would be done through the repurchasing and cancelling all FFB shares in issue in exchange for shares of NEPI Rockcastle N.V. at a share-swap ratio of 0.060207 NEPI Rockcastle shares per FFB share.
If the scheme is implemented, there will be a single class of ordinary share with no impediments to the declaration of distributions.
There are numerous benefits of having a single share, namely that a single share allows for distribution of income at the discretion of the Board without the restrictions of the Memorandum of Incorporation (MOI) and in turn, dividend reinvestment programmes can be implemented. A single share structure offers greater flexibility regarding corporate actions and allows Fortress management to focus on the business rather than on issues resulting from the dual share structure. In addition, shareholders will benefit from greater liquidity in a single share rather than having share liquidity spread across the two different classes, making it appealing to a broader range of potential investors.
Fortress’ dual share structure remains a hindrance and the Board has communicated that it is open to resolving this sub-optimal structure. After the proposal to change the company’s MOI to allow a dividend to be paid to all shareholders from the 2022 financial year’s profits was not approved, some Fortress shareholders have discussed with the company ways to simplify the company’s dual share structure.
The scheme has garnered letters of support from key shareholders such as Peregrine Capital, Coronation Fund Managers, Meago Asset Management and Allan Gray, which represent significant backing for the proposal. Fortress has established the Independent Board, who will in turn appoint an independent expert for the purposes of preparing a fair and reasonable opinion in respect of the scheme. A further announcement about the posting of the scheme circular will be released in due course.
Fortress will remain a financially strong company with a healthy balance sheet, quality assets and a comfortable liquidity position.
As is evidenced in its operational results for the year ended June 2023, the business of Fortress is performing strongly notwithstanding the prevailing challenging and volatile environment. The Board is optimistic regarding the prospects for the business and the property sectors in which the Company operates, with Fortress being well-positioned to continue to produce high quality and growing profits.