Securities in Australand Property Group (ALZ) and Stockland (SGP) ended barely changed yesterday as the market decided Stockland’s all share $2.4 billion takeover offer was only the first round in what could become a prolonged battle for control of Australand.
Stockland shares were down 2 cents at $3.76 and Australand securities ended at $4.23 (off 1.1%) after it rejected the Stockland offer, which has been expected now ever since it snapped up 19.9% of Australand from its Singapore parent a months ago.
There was no offer in time for last week’s pre-Easter AGM of Australand, but one was lobbed from Stockland on Tuesday night and confirmed yesterday.
Australand’s board says a share-swap takeover proposal presented by Stockland on Tuesday was not in the best interests of shareholders.
Australand said the all share offer of 1.11 Stockland shares for every Australand security valued its shares at $4.20 a share, which is below the $4.28 closing price on Tuesday.
Stockland paid $3.78 a share for its 19.9% stake last month.
But analysts say that without a cash component, the offer has no chance of succeeding. Many Australand shareholders are not shareholders of Stockland and don’t want to be.
"The board does not consider that the terms and conditions of the proposal are compelling, nor does it provide sufficient consideration to Australand securityholders in the context of a change of control," the company said in a statement to the ASX.
Australand also rejected a request from Stockland to open its books and enable due diligence on a potential merger.
SGP Vs ALZ 1Y – Prolonged battle looms at Australand
Stockland and Australand own and develop housing estates, industrial properties and office and apartment blocks.
That means there is considerable crossover, especially in housing and industrial properties. These would be potential cost savings, but selling them could also be disposing of profitable future assets and cashflows.
Stockland called on the company’s board to engage in merger discussions (That’s always a sign of a bidder armed with a weak offer that is not a compelling sell to the target board and its shareholders).
"Stockland and Australand are each strong businesses with complementary portfolios and cultures, and long track records of delivering for customers, employees, securityholders and the community," Stockland chairman Graham Bradley said in a statement.
"We believe that the Australand board owes it to its stakeholders to engage with us and facilitate our request for due diligence, to see if a mutually beneficial merger of our two groups can be achieve."
Besides the all paper offer, there’s a suggestion of poor timing.
Stockland tried to buy Capitaland’s stake (its the Singapore parent of Australand) last year, but failed.
That would have made the deal a much better timed offer given the home building and property booms were not as well developed as they are now.
Now Stockland could be in danger of paying top price for price for Australand via an all paper offer which will smother the share price of Stockland for months to come.
