Australand stake still on block
GPT announced on Monday it would walk away from the offer it made in December for Australand's commercial and industrial assets. Investor reaction caused GPT's shares to fall about 1 per cent to $3.92 and Australand was down 3.26 per cent to $3.41.
At the time, analysts said the indicative non-binding offer would be the trigger for a new round of mergers and acquisitions among the real estate investment trusts (REITs). The offer did not include Australand's residential business.
It was suggested Mirvac and Blackstone had also looked at Australand's business, but neither took the process further.
Some of Australand's office assets include King Street Wharf in Sydney and stages one and two of Freshwater Place in Melbourne's Southbank boulevard.
As the REITs have moved ahead of their net tangible assets values - as the property sector gained favour as a higher yielding investment - the appeal of takeovers has become less attractive.
John Kim, head of REIT research at CLSA, said he expected more individual or portfolio property acquisitions, rather than mergers, among the trusts.
"The M, in mergers and acquisitions, may be subdued but the A is still an important theme. We continue to expect M&A to be important in 2013 - although the REITs are more focused on the A, which we estimate have totalled more than $3.4 billion year to date," Mr Kim said.
According to JP Morgan analyst Richard Jones, despite GPT walking away, Australand was a good business which would have interest from many parties. The key is at what price.
"CapitaLand owns 59 per cent of Australand and has announced its investment as non-core. Its negotiating position is clearly weakened by the GPT announcement as there are no longer any live bids," Mr Jones said.
"One potentially viable option for CapitaLand is to sell its investment via a large block stake. This would give it certainty of cash and a quick resolution. It would also clear up the free float issues for Australand and potentially allow its inclusion into the ASX 100. Again the issue for CapitaLand will be price, with a block trade at NTA more difficult now."
Mr Jones said from GPT's perspective it was a "sensible decision" to walk away.
"Australand had rallied too hard for the deal metrics to work. GPT wouldn't bid for Australand's residential business and the Australand board weren't prepared to negotiate for just parts of the business.
UBS's analyst James Besson said he believed CapitaLand would be patient in achieving an "acceptable" price.
Frequently Asked Questions about this Article…
GPT walked away from its $3 billion indicative takeover offer for Australand's commercial and industrial assets. Investor reaction drove GPT shares down about 1% to $3.92, while Australand fell about 3.26% to $3.41. The offer did not include Australand's residential business.
CapitaLand is Australand's major shareholder and owns 59% of the company. The article says CapitaLand is talking to potential purchasers after labelling the investment non-core, so selling its stake — potentially via a large block trade — is being considered.
A block sale would give CapitaLand cash and could increase Australand's free float, possibly allowing inclusion in the ASX 100. However, analysts note price is key: a block trade at net tangible asset (NTA) value may be harder now that Australand's share price has rallied.
The article says Mirvac and Blackstone also looked at Australand but neither took the process further, so no formal bid from those parties was reported.
Australand's office assets highlighted include King Street Wharf in Sydney and stages one and two of Freshwater Place in Melbourne's Southbank boulevard.
Analysts in the article suggested that while mergers (M) might be subdued, acquisitions of individual properties or portfolios (the 'A') would remain important. CLSA's John Kim expected more property acquisitions rather than big mergers, estimating A-type deals had totalled more than $3.4 billion year to date.
Yes — JP Morgan analyst Richard Jones called GPT's decision 'sensible,' saying Australand had rallied too much for the deal metrics to work. He also noted GPT would not bid for Australand's residential business and the Australand board wasn't willing to sell only parts of the company.
UBS analyst James Besson said he believed CapitaLand would be patient in achieving an 'acceptable' price. Richard Jones from JP Morgan also pointed out that a quick block sale would give certainty of cash but that pricing will be the main issue.
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