May 28 (Bloomberg) -- Stockland, Australia’s biggest diversified real estate trust, sweetened its proposal to buy Australand Property Group in an all-share offer valuing the smaller rival at A$2.5 billion ($2.3 billion).
Stockland offered 1.124 of its own shares for every Australand security, equivalent to A$4.35 a share, through an off-market takeover bid, it said in a regulatory filing. The Sydney-based bidder also made an alternate proposal, with a reduced share component and cash of A$250 million, with the structure to be agreed with Australand’s board, it said.
A successful takeover would give Stockland stronger industrial property and residential development portfolios, and boost annual earnings by 5 percent, it said. Today’s bid follows Australand’s rejection on April 23 of a Stockland offer that equated to A$4.20 a share at the time, and A$4.30 based on yesterday’s closing price.
“The question is whether Australand thinks it can do better on its own,” Tony Sherlock, a Sydney-based analyst at Morningstar Inc., said by phone. A successful takeover will likely boost the return on Stockland’s commercial portfolio “because the assets owned by Australand are higher yielding.”
Australand shares fell 0.7 percent to A$4.23 at the close of trading in Sydney. Stockland shares rose 0.3 percent to A$3.88, in line with the benchmark S&P/ASX 200 Index’s gain.
Australand’s board hasn’t formed a view on the proposal and will consider the offer, the Sydney-based company said in a separate statement.
Stockland is assuming cost savings of at least A$15 million in the first year following an agreement, and at least A$25 million every subsequent year, it said today. It expects Australand net tangible assets to remain at A$3.56 a security, it said.
The bid is also based on Australand’s earnings forecast issued March 25, when it said it expects as much as 20 percent growth in operating earnings from 25.6 cents a share in 2013.
“The assets of both companies are complementary and it is our view that Australand and Stockland will be stronger together,” Stockland Chief Executive Officer Mark Steinert said in the statement. “The combined group would be the leading residential developer in Australia, including medium density, the leading owner and manager of shopping centers in regional locations and a top two logistics and business park owner-developer.”
Stockland, which is still seeking access to Australand’s internal documents, will confirm the final proposal within four weeks, when it expects to complete the first stage of due diligence, it said. Stockland also offered Australand shareholders due diligence, it said.
Stockland on March 19 bought a 19.9 percent stake in Australand from CapitaLand Ltd. The Singaporean company sold 135.32 million shares, a 39 percent stake, for A$849 million.
Today’s proposal represents a 22.2 percent premium to the value of Australand’s tangible assets, and is 18 percent higher than the price at which CapitaLand sold, Stockland said.
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