June 4 (Bloomberg) -- Frasers Centrepoint Ltd. offered to buy Australian developer Australand Property Group for A$2.6 billion ($2.4 billion) in the Singapore real-estate company’s biggest proposed acquisition, trumping a bid by Stockland.
Frasers offered A$4.48 per share, Sydney-based Australand said today in a regulatory filing, compared with Stockland’s A$4.43 all-share bid. Shares of Australand, whose board said it intends to recommend the offer in the absence of a superior proposal, posted their biggest gain since December 2012 in Sydney. Frasers shares had the biggest drop in four months in Singapore.
The acquisition would give Frasers control of Australand’s A$2.4 billion of office and industrial properties and A$9.3 billion of developments in Australia, where the Singapore company is already building the 2,000-apartment Central Park project in downtown Sydney. Frasers is seeking to boost its operations in faster-growing overseas markets, which contributed 38 percent of earnings as of March 31 from 10 percent a year earlier, and has flagged Australia and China as preferred destinations.
“Australia is a market that Frasers understands well,” said Goh Han Peng, a Singapore-based analyst at DMG & Partners Securities Pte.“This bid helps them diversify further out of the challenging Singapore market.”
Australand rose 5.6 percent to A$4.55 at the close of trading in Sydney. Frasers shares declined 3.9 percent to S$1.85, the biggest drop since Feb. 4.
Private home prices in Singapore dropped by the most in almost five years in the first quarter following a campaign that started in 2009 to curb property speculation. Dwelling prices in Australia’s biggest cities rose 10.7 percent in May from a year earlier, according to the RP Data-Rismark Home Value index.
CapitaLand Ltd., formerly Australand’s biggest shareholder, sold its 39 percent stake in the company in March.
Australand was a financial investment for CapitaLand, which shifted its focus to Singapore and China after Chief Executive Officer Lim Ming Yan took over in January 2013, DMG’s Goh said. Australia is one of Frasers’s core markets, so an expansion is logical, he said.
Stockland bought 19.9 percent of the Sydney-based company on CapitaLand’s exit, and followed that with an all-share bid equivalent to A$4.20 a share, which Australand rejected on April 23. It returned with a sweetened bid that equated to A$4.35 a share on May 28 and A$4.43 based on yesterday’s closing price, gaining access to Australand’s books.
Australand revoked that access today, saying it has granted Frasers a four-week period of exclusivity. Under Frasers’s offer, Australand shareholders would retain their expected first-half dividend of 12.75 Australian cents per share, the Sydney-based company said. They would also receive an additional payout equal to the same amount pro-rated from July 1 until the offer becomes unconditional, it said.
“The board concluded that the conditional proposal would deliver a compelling value outcome for Australand securityholders and is superior to the final and conditional proposal received from Stockland,” Australand Chairman Paul Isherwood said in the statement.
Frasers’s offer is subject to approval by Australia’s Foreign Investment Review Board, and the backing of Frasers shareholders.
Stockland will consider its options and provide an update in due course, it said separately today.
Frasers’s offer “is a very full price so it’s a great outcome for Australand shareholders, but I would be surprised if Frasers gets much additional value out of it,” said Tony Sherlock, Sydney-based head of property research at Morningstar Australasia Pty. “In the context of Stockland, I would be very surprised if they kept raising, as they’d have to go a fair bit higher than their current offer to trump this.”
The bid is the biggest for Frasers Centrepoint, according to data compiled by Bloomberg, since it was spun off from Fraser & Neave Ltd. and began trading independently in January. The company, whose businesses include residential development, commercial property management and a hospitality unit, is seeking to expand in Australia and China as Singapore’s housing market slows, Lim Ee Seng, chief executive officer of Frasers Centrepoint, said in a May 9 statement.
“The proposal will catapult Frasers Centrepoint to being one of Australia’s leading real estate companies with a portfolio of scale and quality,” Lim said in a separate statement today. “We already have an established platform and good brand recognition in Australia, but real estate is a business where scale and depth matters.”
Australand’s board in December 2012 rejected a bid by GPT Group, Australia’s second-biggest property trust, to acquire Australand’s industrial and commercial property divisions. GPT dropped its pursuit in May last year after failing to agree on a price that would compensate Australand shareholders for being left with a standalone residential property developer.
Australand shares are up 18 percent this year, and 7.6 percent since Stockland’s sweetened bid on May 28. Frasers’s shares have gained 25 percent since they began trading Jan. 9.
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