28 May 2014 – Stockland today (Wednesday) launched a bid for full control of Australand with a $2.4 billion “final and non-binding bid” for remaining shares, after its 19.9 per cent stake acquired in March.
The bid is at an implied price of $4.35 per security, based on the closing price of Stockland securities on Tuesday, with volume weighted average price $3.876 and is a full scrip offer of 1.124 Stockland securities for every Australand security, Stockland said.
Both companies are leaders in sustainable development – Stockland in commercial and retail and Australand in industrial.
- See our February article, Australand registers first industrial Green Star Performance building
The media statement from Stockland said:
The proposal is final, in the absence of a superior proposal.
Stockland managing director and chief executive, Mark Steinert said: “This compelling final offer represents a substantial premium against a range of measures and would bring together two high calibre companies with complementary assets and cultures. Importantly, the combined group would be the leading residential developer in Australia, including medium density, the leading owner and manager of shopping centres in regional locations and a top two logistics and business park owner/developer.”
The Final Proposal represents compelling value to Australand security holders and is a:
- 22.2 per cent premium to Australand’s NTA
- 18.0 per cent premium to the price at which CapitaLand sold (and institutional investors purchased) 20 per cent of the outstanding securities on issue on 21 November 2013
- 16.9 per cent premium to the price at which CapitaLand sold (and institutional investors purchased) 23.4 per cent of the outstanding securities on issue on 19 March 2014
- 12.1 per cent premium to the Volume Weighted Average Price (‘VWAP’) of $3.88 for the three month period up to and including 18 March 2014, the day prior to Stockland acquiring an interest in 19.9 per cent of Australand
As an alternative form of consideration, Stockland is prepared to offer a reduced scrip ratio, together with a cash component up to an aggregate of $250 million, with the structure to be agreed with the Australand board.
“We have made this final offer following dialogue with Australand. The offer is designed to provide securityholders with a range of choices to meet their specific investment requirements. It provides an attractive valuation for Australand and the opportunity for Australand securityholders to retain an exposure to a more diversified and larger group, which will benefit from meaningful synergies.
“Overall, the assets of both companies are complementary and it is our view that Australand and Stockland will be stronger together. This will create value for all security holders,” Mr Steinert said.
“All security holders will benefit from material accretion in earnings per security – estimated at 5 per cent annualised – generated by the combination. Our proposal is final, and we call for the Australand board to engage with us, provide targeted due diligence and ultimately allow us to put this proposal to Australand security holders.
“In recent weeks we have engaged extensively with significant Australand security holders and Stockland security holders and have been encouraged by their response to our original proposal.”
Australand security holders will realise significant benefits from exposure to the combined group, including:
- a holding in a national leader in residential development, with the largest residential development pipeline in Australia, incorporating land subdivision and medium density built form with significant geographic diversity
- a high quality, diversified investment portfolio with accretive reinvestment opportunities
- EPS accretion and sustainable estimated synergies available from the combination that would otherwise not be available to Australand securityholders
- exposure to a larger and more liquid entity, backed by an A- credit rating. ?The combination is strongly aligned with Stockland’s strategy, in particular providing
- a stronger logistics & business parks portfolio with an increased lease duration
- an enhanced medium density capability
- an increased proportion of the residential portfolio located in NSW
- an additional 5 per cent annualised pro-forma accretion to Stockland’s EPS in the first full year of a merger, subject to confirmation in due diligence and based on the major assumptions set out in our offer letter.
Stockland reconfirms its guidance of six per cent EPS growth in FY14, assuming there is no material decline in market conditions and targeted five per cent annual average EPS growth through the cycle. Accretion from this proposed merger with Australand, would be incremental to this in the first year of a merger.