GPT presses on despite rebuff from Australand
Brokers have said that in order to strike a deal, GPT must win over Australand's major shareholder, CapitaLand. But that stake won't be won without GPT being forced to pay a significant premium to Australand's net tangible assets.
In a short statement, GPT's management said on Friday that it was "committed to advancing a proposal which it believes is in the best interests of Australand's and GPT's security holders".
Australand said the indicative price, as yet undisclosed to investors, was at a premium of $140 million to the June 30 book value.
"We note that this premium represents 24.3¢ per Australand security, which is 7 per cent above its current stated net tangible asset backing of $3.46 per security. GPT believes its proposal provides a compelling value proposition for the security holders of Australand," GPT's statement says.
Analysts at the Commonwealth Bank said they believe CapitaLand may accept, given Australand's growth prospects may be unattractive compared with opportunities within Asia and CapitaLand could crystalise a gain above book value.
They noted CapitaLand has a new chief executive starting on January 1, which could result in a new direction. "Based on GPT paying a 10 per cent premium to book value and equity raising at $3.40, we believe GPT could increase calendar year 2013 earnings by 8.2 per cent."
The move has been made before GPT and Australand's financial years end on December 31.
Frequently Asked Questions about this Article…
GPT Group has pressed ahead with a takeover proposal for Australand's key non‑residential assets despite initial overtures being rejected. GPT says it is committed to advancing a proposal it believes is in the best interests of both Australand's and GPT's security holders, and brokers describe the tussle as hostile.
CapitaLand is Australand's major shareholder, so brokers say GPT will need to win CapitaLand's support to strike a deal. That stake is significant, and securing it is expected to require GPT to pay a meaningful premium to Australand's net tangible asset backing.
GPT has not publicly disclosed the indicative price to investors. Australand said the indicative price (undisclosed) represents a premium of $140 million to the June 30 book value — equivalent to 24.3 cents per Australand security, about 7% above its stated net tangible asset backing of $3.46 per security.
A premium to net tangible assets means the offer price is above Australand's stated book value per security. In this case the premium is equivalent to 24.3 cents per security (about 7% above the $3.46 NTA), which could provide Australand security holders with an immediate gain above book value if the offer is accepted.
Analysts at the Commonwealth Bank suggested CapitaLand may accept because Australand's growth prospects could be less attractive compared with opportunities in Asia, and accepting would allow CapitaLand to crystallise a gain above book value. They also noted CapitaLand has a new chief executive starting on January 1, which might influence the decision.
Commonwealth Bank analysts estimated that if GPT paid a 10% premium to book value and conducted an equity raising at $3.40, GPT could increase calendar year 2013 earnings by about 8.2% under their scenario.
Investors should watch for any formal price disclosure, CapitaLand's response, announcements about equity raising plans, and further statements from GPT and Australand. The move was made before both companies' financial years end on December 31, so developments could accelerate around year‑end.
GPT says its proposal provides a compelling value proposition for both sets of security holders. For Australand holders, the reported premium could mean a gain above book value if accepted. For GPT holders, potential impacts include the earnings uplift scenario suggested by analysts and any capital actions (such as equity raising) that might be required to fund the deal. Investors should monitor official announcements for concrete details.
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