The volatile stockmarket is not stopping some companies from pursuing strategic options.
Some might call it ‘bottom fishing’ as stronger companies hunt for deals and rationalisation opportunities in some of the sectors they operate in.
Property group, Stockland said on Sunday that it would use the $300 million it raised in an equity placement last week to pay debts and expand its retirement business and yesterday it revealed its hand straight away.
It confirmed it had snapped up more than 14% of a major listed retirement business, Aevum. But it says it will finance this purchase by way of debt and not use the money raised last week.
In a statement to the ASX, Stockland said it had "acquired a strategic 14.4% stake in listed retirement living operator Aevum Limited from Babcock & Brown for $1.50 per share, or $26.9 million.
"Stockland Managing Director Matthew Quinn said the acquisition of the Aevum stake was consistent with the company’s strategy to increase its presence in the retirement living sector.
"Aevum is a conservatively managed company with a sound balance sheet," Mr Quinn said.
"We look forward to having a constructive dialogue with the Board as the company’s largest shareholder."
"The acquisition will be funded via debt and will be EPS neutral in FY09. The $1.50 acquisition price represents a 31% discount to Aevum’s NTA as at 30 June 2008.
"Stockland is one of Australia’s leading retirement village operators with 20 villages containing 3,445 Independent Living Units (ILUs) across Victoria and Queensland. Its development pipeline as at 30 June 2008 consisted of 3,630 units with an end of value of $1.5 billion."
News of the deal saw Stockland’s shares jump strongly to $5.15, then ease back as the overall market cooled from the hectic morning rise. The shares ended up 6% or 27c at $4.77.
Aevum shares rose more than 10% to $1.50. Around this level the company is valued at about $185 million.
No mention of any bid was forthcoming, but desperate punters reckon one will happen.
Mr Quinn told ABC Television’s Inside Business program on Sunday that the company’s gearing was "still very low but in times like this it’s about what happens in the future and building in some contingency and buffer into the business plan".
And major engineer, Bradken has taken advantage of the market drop to build a 6%-plus state in smaller rival, Austin Engineering.
In a statement to the ASX, Bradken said:
"Bradken Limited (“Bradken”) today announced that following a recent acquisition of shares, it now holds 6.62% of the ordinary shares in ASX listed Austin Engineering Limited.
"This holding is intended to be a long term strategic investment by Bradken and is consistent with its objective of seeking out value investments that complement its business model or product offering.
"Bradken may consider further increasing its shareholding, should the opportunity arise or circumstances change and Bradken determines that it is appropriate to do so, however, Bradken does not have any current intention of making an offer for Austin Engineering Limited."
Bradken shares rose 5%, or 31c to $6.44 after touching a high of $7.08. Austin shares rose 8%, or 15c, to $2.00.
At this level it is valued at a touch under $100 million. At yesterday’s close Bradken was valued at almost $800 million.
Austin is complementary to Bradken. It’s an engineering company with manufacturing facilities in Australia, USA and the Middle East.
The Australian and USA facilities provide fabrication facilities servicing the mining, oil, gas and industrial sectors.
The Middle East operation provides specialised products and services for the aluminium smelter industry.
Austin owns rights to welding processes and robotic applications to suit product lines, general fabrications and any repetitive production processes.
Bradken operates in Australia, the US and China and services the resource industries through its rail waggon and engineering operations and also the state rail authorities.
In the year to June Austin earned $10.9 million net on sales of $106 million.
