THE corporate raider Darren Olney-Fraser has warned that apartment prices could plunge at housing projects and retirement villages owned by the embattled Becton Property Group, unless the company can broker a deal with lender Goldman Sachs.
Failure to strike a deal with Goldman Sachs - which last week bought the $200 million debt owed by Becton to Bank of Scotland International for just $100 million - could also see the future of the state government's $1.2 billion Bonnyrigg social housing project thrown into doubt.
Becton is the builder of the Bonnyrigg project, where an 81-hectare government-owned housing estate is being turned into 2433 dwellings.
Should Becton be put into into receivership by Goldman Sachs, the construction company could be forced out of the Newleaf Communities partnership with Westpac, the property maintenance firm Spotless Group and St George Community Housing.
Newleaf holds the rights to build and run Bonnyrigg until 2037.
"If Becton and Goldman Sachs can work together, Becton can once again be a powerful player in property," Mr Olney-Fraser said.
"If Goldman Sachs uses this deal with [Bank of Scotland] to put Becton into receivership, the project at Bonnyrigg will be adversely affected. This would have a big impact on the many families which Becton is helping in partnership with the NSW government."
Becton - once a giant of the Australian construction industry with a market capitalisation in excess of $4 billion - now has just $300 million of assets on its books, $300 million of debt, and a market value of $3.4 million.
The remaining assets include more than 1000 units in retirement villages in Melbourne and Sydney, valued at an estimated $150 million, as well as housing projects at Bonnyrigg and Waterloo in Sydney and Kensington in Melbourne.
"History shows that if a retirement village falls into receivership, there is a major impact on unit values," Mr Olney-Fraser said.
"No potential buyer wants the uncertainly of buying into a village that is controlled by a receiver, or has recently been in receivership."
Mr Olney-Fraser's company, Mariner, is the largest shareholder in Becton, with 18 per cent of the company's shares. Mariner will on Monday seek shareholder approval to exercise options that will take its stake in Becton to 30 per cent. Mr Olney-Fraser will also make a second attempt to join the board.
In November Mariner's chairman, Donald Christie, joined the board of Becton, but Bank of Scotland objected to Mr Olney-Fraser taking a second seat, stating that Mariner could exert too much control of the company.
"Mariner wants two directors on the Becton board, and we won't stop until we get them on," Mr Olney-Fraser said.
"We will convert our options to shares, taking Mariner's shareholding in Becton to about 30 per cent, making it the largest shareholder of Becton."
As the battle for control of the company heats up, Mr Olney-Fraser has taken a swipe at the pay packet of Becton's chief executive, Matthew Chun, pointing out that his $1 million annual remuneration is almost one-third of the company's entire value.
"It's time for Matthew Chun to deliver something out of the [Bank of Scotland] debt sale for shareholders. He has done a great job keeping Becton alive post-GFC, but shareholders have been smashed along the way. "
Mr Chun said he was unable to comment on Mr Olney-Fraser's remarks as Becton was in the midst of a trading halt and due to make a statement to the ASX on Monday.
Frequently Asked Questions about this Article…
What is the dispute between Becton Property Group and Goldman Sachs about?
Goldman Sachs recently bought the $200 million debt owed by Becton to Bank of Scotland International for $100 million. The article says that unless Becton can broker a deal with Goldman Sachs, Goldman could put Becton into receivership — a move that has triggered warnings about potential property value falls and project disruptions.
How could a Goldman Sachs receivership affect the Bonnyrigg social housing project?
Becton is the builder on the $1.2 billion Bonnyrigg social housing redevelopment. If Goldman Sachs moved to place Becton into receivership, Becton could be forced out of the Newleaf Communities partnership (which includes Westpac, Spotless Group and St George Community Housing). That, the article says, could adversely affect the Bonnyrigg project and the families the project is intended to help.
What are Becton’s current assets, debt and market value as reported in the article?
According to the article, Becton now has about $300 million of assets, roughly $300 million of debt, and a market value around $3.4 million. Remaining assets include more than 1,000 retirement-village units estimated at $150 million and housing projects at Bonnyrigg, Waterloo (Sydney) and Kensington (Melbourne).
Why might unit values fall if Becton’s retirement villages go into receivership?
The article quotes Darren Olney-Fraser saying history shows receivership has a major negative impact on retirement village unit values. He explains potential buyers are deterred by the uncertainty of purchasing a village controlled by, or recently managed by, a receiver, which can push down resale values.
Who is Darren Olney-Fraser and what stake does his firm Mariner have in Becton?
Darren Olney-Fraser is described as a corporate raider and head of Mariner, which at the time of the article was Becton’s largest shareholder with 18% of the shares. Mariner planned to seek shareholder approval to exercise options to lift its stake to about 30% and was trying to place two directors on Becton’s board.
What would Mariner’s increased shareholding mean for control of Becton?
If Mariner converts its options to shares as planned, its holding would rise to roughly 30%, making it the largest shareholder. The article says Mariner wants two directors on the Becton board and intends to keep pushing for board representation, which could significantly increase its influence over company decisions.
What criticism did Olney-Fraser make about Becton’s CEO Matthew Chun?
Olney-Fraser criticised CEO Matthew Chun’s $1 million annual remuneration, saying it amounts to almost one-third of the company’s entire market value. He said Chun needs to deliver results from the Bank of Scotland debt sale to protect shareholders. The article notes Chun could not comment because Becton was in a trading halt and due to make an ASX statement.
What immediate developments should everyday investors watch regarding Becton?
Based on the article, investors should watch whether Becton and Goldman Sachs can reach a deal (to avoid receivership), the outcome of Mariner’s shareholder vote to exercise options (which would increase its stake to about 30%), and Becton’s forthcoming ASX statement after the trading halt for official updates.
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