Retirement village group Aevum Limited has rejected an unsolicited takeover offer proposal from real estate group Stockland.
The bid, revealed yesterday at a premium of almost 50% to Aveum’s last closing price, came as a surprise.
In a statement with the offer, Stockland said it had built up a stake of 15.9% in Aveum.
"Stockland acquired an initial 14.4% stake in Aevum for $1.50 per share, or $26.9 million, in October 2008.
"Following Aevum’s merger with IOR Group in early 2010, this stake was diluted to 10.1%," Stockland said yesterday.
"The offer values the total equity of Aevum at $266 million and, if successful, would almost double the size of Stockland’s Retirement Living business.
"Based on the closing share price of Aevum on 30 July 2010 of $1.09, Stockland’s offer is compelling and represents a substantial premium, Stockland said in yesterday’s statement .
But Aevum chairman Graham Lenzer was having none of that and told the market in a statement that the company’s board would reject Stockland’s proposal of $1.50 cash per share.
"The Aevum board has carefully considered Stockland’s unsolicited and opportunistic proposal and believes that it significantly undervalues Aevum," Mr Lenzer said in a separate statement issued yesterday.
That’s despite the $1.50 a share being the highest price for around 9 months.
Mr Lenzer said Stockland had sent the "incomplete" proposal to Aevum’s board on Friday evening, saying it had prepared a full bid and would proceed with an off-market cash bid if Aevum did not work with it to agree terms, according to the targets response statement on Monday.
Aevum said it was yet to receive a formal offer or bidder’s statement from Stockland and hence the company’s board was unable to make a formal recommendation to shareholders and told them to take no action for the time being.
Aevum says it’s "a long established owner, operator and developer of retirement villages and aged care facilities" and "it manages 30 facilities across NSW, Victoria, Queensland, South Australia and Western Australia providing retirement accommodation and services to over 3,100 units, for Australian seniors. Aevum also has four aged care facilities with 367 beds. Aevum employs over 600 dedicated and committed staff".
Stockland said in its statement that, "Aevum has a total of 29 established retirement villages across Australia. This includes 17 in New South Wales, the largest for-profit market, and another 12 across Victoria, Queensland, South Australia and Western Australia. In addition, Aevum has a development pipeline of around 800 brownfield development units.
"Aevum’s aged care business comprises just 5% of its net assets. Stockland would undertake a strategic review of the aged care operations to identify the most appropriate action, in line with its strategy to offer access to aged care services through specialist third-party providers rather than directly managed operations."
Shares in Aevum closed down one cent at $1.09 on Friday, while shares in Stockland ended 11c lower at $3.79.
Yesterday Aveum shares jumped 41%, or 45.5c, to $1.545 a share and Stockland rose 5c, or 1.3%, to $3.84.
The last time Aveium’s shares touched the $1.50 level was back in October of last year.
The shares have been sliding and going nowhere ever since until the Stockland announcement yesterday.
They hit a 12 month low of $1.01 in late May.
This will come down to price. Stockland has a minimum acceptance condition of 50.1% in its bid documents. That means it can live with outside shareholders in Aveum, so long as it has majority control at $1.50, or perhaps a few cents more.
