Investment companies Mergence Investment Managers and Creation Capital have incorporated a new special purpose vehicle called Sustent Holdings, which has made an offer to buy JSE-listed renewable-energy company Mahube Infrastructure and delist it.

The transaction offers an attractive opportunity for shareholders wishing to exit their investment at a premium to the trading price of the shares, Mergence says.

Specifically, at a cash consideration of R5.50 a share, the offer represents a premium of 30.64% to the closing share price of R4.21 and a premium of 32.31% to the 30-day volume weighted average share price of Mahube of R4.16 a share as at January 22, this year – the last practicable date prior to the offer for communicating its intention to launch the proposed transaction to the company.

Further, the transaction presents a good investment opportunity for the investment companies to participate in an established pool of assets that exhibit the commercial, financial and operational characteristics that align closely with the investment profile.

Mergence has extensive experience in renewable-energy investments and launched its first private debt fund focused on South Africa’s successful Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) in 2013.

“In its delisted form, Mahube can reduce a significant portion of its cost structure and, more importantly, it will be valued in line with private market valuation methodologies, as opposed to sentiment-driven pricing on the JSE,” says Mergence head of private debt Mosa Molebatsi.

“Further, as a delisted entity, Mahube could be positioned as a vehicle that aggregates equity stakes in projects from earlier rounds of the REIPPPP. This will position Mahube as a significant player for private equity investments in large-scale infrastructure assets in South Africa and possibly beyond,” she notes.

“Infrastructure investing remains a key pillar of our strategy, and Mahube's portfolio, underpinned by stable REIPPPP agreements, is a high-quality asset that fully executes on this vision,” says Creation Capital chief investment officer Freddy Magoro.

“Taking Mahube private is the first step in unlocking long-term value and positions the company to accelerate capital raise into much-needed infrastructure projects.”

The transaction is subject to final approval by the shareholders of Mahube, the South African Reserve Bank and the Competition Commission, Mergence adds.

Meanwhile, Mahube was listed as a special purpose acquisition company, and is the holding company for minority stakes in five renewable-energy assets, including three solar and two wind farms with a total generation capacity of about 400 MW.

The projects form part of rounds 1 and 2 of the REIPPPP and are covered by power purchase agreements with State-owned power utility Eskom.

However, as a listed entity, Mahube struggled to scale beyond its initial portfolio in the listed environment, Mergence says.