Cash always wins in takeover situations and that will again be shown to be the case unless Stockland (SGP) decides to add a whole lot more of the folding stuff to its offer for Australand (ALZ) after a Singapore property group yesterday produced a surprise $2.6 billion all cash counter bid.
The offer from Singapore-based Frasers Centrepoint was also surprising because Australand has been long controlled by Capitaland, the biggest property group in Singapore, which has been selling down its stake in Australand.
It looks to some outsiders like a Singapore version of ‘pass the parcel‘ with control of Australand being flicked around the big property groups in the island state.
Frasers is already a major developer of residential apartments and some housing in Australia, as well as an increasing amount of commercial property. In fact it is a smaller version of the much larger Australand in this country.
The Frasers offer is to acquire 100% of Australand through an off-market takeover offer for cash consideration of $4.48 for each Australand share.
That is a $2.59 billion cash offer, trumping Stockland’s share-swap deal of around $2.5 billion.
The Stockland share and cash offer was worth $2.5 billion, conditionally.
The cash component of $250 million was to become available if the Australand board recommended the offer – it was a sort of cash carrot.
Stockland was forced to add this big wodge of cash to sweeten what was a marginal deal based on the all scrip offer. The sweetened offer was declared final by Stockland in an unusually hairy chested example of stockmarket macho.
That has now left it short of firepower to counter the Frasers offer.
Stockland holds a 19.9% stake in Australand and can block Frasers getting 100%, but Frasers has slipped a 50.1% acceptance condition into the offer, so it doesn’t really need the Stockland shares.
ALZ 1Y – Frasers enters Australand battle
Australand chairman Paul Isherwood said in a statement yesterday that "to the extent the proposal becomes a binding offer to acquire Australand securities, the Australand Board intends to recommend the Proposal, in the absence of a superior proposal and subject to an independent expert opinion concluding the Proposal is fair and reasonable to Australand security holders”.
Under the terms of the Proposal, Australand securityholders would also be entitled to retain the expected first half 2014 distribution of 12.75c per stapled security, which would provide total value of $4.6075 in cash for each stapled security; and an additional distribution which accrues to the date an offer from Frasers becomes unconditional.
This additional distribution represents the expected second half 2014 distribution of 12.75c per stapled security pro-rated for the period from 1 July 2014 until the offer becomes unconditional (subject to a maximum of 12.75c per security).
”Before it could be progressed, the Proposal expressly required Australand to enter into a Process Agreement with Frasers by 3 June 2014, which amongst other items, granted Frasers a period of exclusive due diligence.
”In this context, and based on the Board’s conclusion that the Proposal provides a superior value outcome for Australand securityholders relative to Stockland’s conditional proposal dated 28 May 2014 (which was final in the absence of a superior proposal), Australand has entered into a Process Agreement with Frasers to progress the Proposal in which it has granted Frasers a four week period of exclusivity," Australand’s chairman said in yeserday’s statement.
Australand shares rose more than 5% in yesterday’s falling market to end at $4.565.
Stockland shares rose 2.2% to $4.03 as investors reckoned the company had escaped a potential black hole with the Australand bid.
In its proposal, Frasers said there were a number of pre-conditions to be satisfied. These were:
• A minimum acceptance condition of 50.1%;
• Foreign Investment Review Board approval;
• Australand continuing to conduct its business in the ordinary course;
• No changes to Australand’s distribution policy and no further securities or performance rights issued (other than the issue of securities in satisfaction of existing performance rights);
• No material changes to Australand’s senior management team;
• No prescribed occurrences, material acquisitions or disposals or regulatory actions; and
• Frasers shareholder approval (more than 50% present and voting). Frasers has stated that its major shareholder, TCC Assets Ltd (which holds 59.4% of Fraser’s securities), intends to provide an irrevocable undertaking to vote in favour of the Proposal.
