Australand Property Group rejected a takeover offer by its biggest shareholder Stockland after the bid valued the Australian property trust 2 percent lower than its market capitalization.
Stockland, Australia’s biggest diversified property trust, offered 1.111 of its own shares for each Australand share, or the equivalent of A$4.20 a share, the latter said in a regulatory filing to the Australian stock exchange today. That valued Australand 2 percent lower than its A$2.48 billion ($2.32 billion) market capitalization.
Stockland Chief Executive Officer Mark Steinert, who wants to increase the trust’s exposure to retail and industrial properties, bought a 19.9 percent stake in Australand March 19, when Singapore’s CapitaLand Ltd. exited its investment. Australand, which has an industrial portfolio, also offers a landbank that would assist Stockland residential development business.
“I consider this offer the first round and expect a higher bid in the coming weeks,” Tony Sherlock, a Sydney-based analyst at Morningstar Inc., said by phone. “Australand is fully valued now and Stockland may offer a slight increase for control.”
Australand shares closed 1.2 percent lower at A$4.23 in Sydney. The stock has climbed 10 percent between March 18, a day before Stockland bought its stake, and yesterday. Stockland ended 0.5 percent lower at A$3.76, while the benchmark S&P/ASX200 Index rose 0.7 percent.
“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,” Australand said in the statement. It advised shareholders take no action.
Australia’s property trusts have been the subject of a number of transactions this year. Dexus Property Group, Australia’s biggest listed office landlord, and partner Canada Pension Plan Investment Board won a takeover battle for an office fund managed by Commonwealth Bank of Australia when GPT said in January it wouldn’t raise its offer.
Stockland bought the 19.9 percent stake last month at A$3.78 a share from CapitaLand, Southeast Asia’s largest developer. Australand shares already reflect a “significant takeover premium” and if investor price expectations were too high, Stockland would sell its stake, the firm said in a separate statement today.
“It is an opening gambit by Stockland,” Winston Sammut, who helps oversee about A$100 million, including Stockland shares, as managing director of Sydney-based Maxim Asset Management, said by phone. “An improvement will come, probably by about 5 cents. Australand is where it is now because of Stockland’s stake buy last month.”
Stockland expects to save A$15 million in the first year of completing the transaction, it said in today’s statement.
Stockland is advised by Citigroup Inc. Global Markets Australia Pty, Bank of America Corp. and UBS AG, while Fort Street Advisers, Macquarie Capital (Australia) Ltd. and King & Wood Mallesons are advising Australand, according to the statement.