Centro demerger edges ever closer

The Centro demerger and restructure is a plan to separate Centro Properties and Centro Retail Trust, sell certain assets and create a planned $4 billion new trust that will own Centro’s Australian shopping centres. For everyday investors this matters because it changes how the business is organised, who owns the assets and how value and risk are allocated across the new entities.

Bob Edgar was appointed chairman of the planned $4 billion trust to help lead the restructured group. He spent 25 years at ANZ Banking Group in senior roles (including deputy chief executive, senior managing director, chief operating officer and chief economist) and currently holds board positions at Asciano, Transurban Group and Nufarm. His experience is being positioned as central to completing the restructure and stabilising the business.

Investors are scheduled to vote on the strategic implementation plan in mid‑November. If the plan is approved, the two existing groups will be formally dissolved and the new fund that will own the Australian shopping centres will be created as part of the demerger process.

The new fund created by the demerger will own Centro’s Australian shopping centres, consolidating those retail assets into the planned $4 billion vehicle.

According to the article, Mr Edgar’s appointment is expected to see the group emerge debt free after a four‑year battle with bankers and disgruntled investors, making debt reduction a key objective of the restructure.

Following Bob Edgar’s appointment, the Centro board will be looking at candidates for chief executive of the new fund to replace the incumbent Robert Tsenin, so a CEO change is being considered as part of the restructure.

The two groups are in court finalising details of the de‑coupling of the businesses, the sale of assets and the subsequent creation of the new fund. Those court processes and asset sales are the remaining steps before the demerger is completed.

About four years ago Centro’s former executives, led by founder Andrew Scott, revealed the business could not repay close to $4 billion of debt due by the end of 2007. That admission triggered a severe market reaction in which close to 90% of Centro’s market value disappeared over two days, a key episode that underpins the current restructure.