Australand shares dropped 0.9 percent to A$3.50 at the close of trading in Sydney, after earlier falling as much as 6.2 percent. GPT shares reversed an earlier 1.6 percent decline to end the day up 0.1 percent at A$3.97.
GPT, Australia’s second-biggest diversified property trust by market capitalization, yesterday said it was abandoning its pursuit of Australand’s commercial property and development businesses because a transaction at the price it was willing to pay wasn’t possible. Australand in December rejected GPT’s offer, which would have left the target with only the residential development business, saying it didn’t offer a “compelling” value proposition.
“We see this as a sensible decision from GPT’s perspective,” analysts led by Richard Jones at JPMorgan Chase & Co. wrote in a client note today. “GPT wouldn’t bid for Australand’s residential business and the Australand board wasn’t prepared to negotiate for just parts of the Australand business at a price which could allow it to execute the deal and maintain acceptable returns from the transaction.”
Australand yesterday confirmed it was unable to develop a proposal with GPT that was “compelling” for its shareholders.
“Australand advises that, while it is not in receipt of any other formal proposals, the process has not reached a conclusion and it will update the market once the process has been completed,” it said.
CapitaLand, which owns 59 percent of Australand, said in January it would consider exiting its investment in the Sydney-based company. Yesterday’s announcement isn’t expected to have any “material impact” on CapitaLand’s net tangible assets or earnings per share, the company said in a separate statement.
“We expect CapitaLand to offer part or all of its 59 percent holding in Australand in a secondary offering, which would attractively increase its liquidity,” John Kim, head of real estate research at CLSA Asia-Pacific Markets, said in an e-mailed note today.
Australand’s office and industrial investment properties were valued at A$2.3 billion ($2.2 billion) as of Dec. 31, according to the company. The company’s planned commercial development projects, included in GPT’s bid, had an end value of A$2.1 billion, and its planned residential developments, which weren’t included in GPT’s bid, will be worth a total A$8 billion on completion.
GPT “doesn’t need to proceed with the transaction to achieve its strategic goals,” GPT said yesterday.
Australand shares have risen 2.9 percent this year, compared with a 7.9 percent increase in GPT’s stock and a 6.9 percent gain in the benchmark S&P/ASX 200 Index.
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