Investors rubber stamp Blackstone takeover of Valad

IT TOOK investors just over 30 minutes yesterday to hand control of the now-defunct Valad Property Group to the US giant Blackstone.

By InvestSMART · 2 Aug 2011

By InvestSMART ·
2 Aug 2011

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IT TOOK investors just over 30 minutes yesterday to hand control of the now-defunct Valad Property Group to the US giant Blackstone.

At the meeting, attended by more investment bankers and advisors than Valad unitholders, 95 per cent of the register voted "yes" to the scheme of arrangement.

Helping to push the deal over the line was a report by Valad's independent expert, KPMG, which concluded that while the scheme "was not fair" it was reasonable and therefore in the best interests of Valad securityholders in the absence of a superior offer.

Valad's chairman, Trevor Gerber, told the meeting the Blackstone deal had the unanimous backing of the board and senior management. "One can dwell on the past but clearly the future is all that is relevant," he said.

"The company [directors and staff] has laboured as much as we can to get the best possible outcome for unitholders." Blackstone, which is also in the final throes of buying out Centro's US shopping malls, will now take the scheme to the NSW Supreme Court for final approval. Once that has been received, Valad will cease trading on August 12.

Before Blackstone's offer, Valad - which was previously run by Peter Hurley, who left earlier this year after trying to acquire the European business - had looked at a number of options to keep the company afloat.

After Mr Hurley left, former UBS banker Clem Salwin took over as acting chief executive and, with the board's approval, concluded the sale to Blackstone was the best way to maximise shareholder value.

Valad was founded by Stephen Day and Barry Wynne in 1995 and shortly afterwards Mr Hurley joined as the chief executive.

The company was floated in 2002 by Macquarie Bank at $1 per security and reached its peak in 2007 when it paid $2 billion for Kevin McCabe's British-based property funds management company, Scarborough.

During its rise, along with the rest of the REIT sector which was buying properties at the top of the market using long-term debt instruments, Valad's shares hit a high of $42.92 (before last year's 20-1 share consolidation) and then plummeted to a low of $1.78, (8? before the consolidation).

In April, Blackstone offered investors $1.80 post the consolidation.

The deal was pre-empted by Blackstone buying out $165 million of Valad's convertible notes from Kimco Realty.

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Frequently Asked Questions about this Article…

What happened in Blackstone's takeover of Valad Property Group?

Valad unitholders voted overwhelmingly in favour of Blackstone's scheme of arrangement, with about 95% of the register voting yes. The independent expert KPMG said the scheme was “not fair” but “reasonable” and the deal, backed unanimously by Valad’s board and senior management, will now go to the NSW Supreme Court for final approval. Once approved, Valad will cease trading on August 12.

Why did Valad shareholders approve the Blackstone takeover so quickly?

Shareholders were swayed by the board’s unanimous recommendation and KPMG’s independent expert report saying the scheme was reasonable and in unitholders’ best interests in the absence of a superior offer. The vote was decisive — it took just over 30 minutes and about 95% of the register voted yes.

What did KPMG mean when it said the scheme was “not fair” but “reasonable”?

According to the article, KPMG’s independent expert report concluded the proposed scheme wasn’t “fair” on strict valuation grounds but was nonetheless “reasonable” and therefore in the best interests of Valad securityholders given there was no competing superior offer.

What are the next steps after shareholder approval of the Blackstone- Valad deal?

After the shareholder vote, the scheme must be taken to the NSW Supreme Court for final approval. If the court approves it, Valad will stop trading on August 12, as stated in the article.

How much did Blackstone offer Valad investors for their securities?

In April, Blackstone offered Valad investors $1.80 per security after Valad’s 20-for-1 share consolidation earlier in the previous year.

How did Valad’s recent corporate history lead to the sale to Blackstone?

Valad, founded in 1995 and floated in 2002 by Macquarie Bank, expanded aggressively (including a A$2 billion purchase of Scarborough in 2007) and used long-term debt, which left it vulnerable when the market turned. Leadership changes followed — Peter Hurley left and Clem Salwin became acting CEO — and the board concluded a sale to Blackstone would best maximise shareholder value.

Did Blackstone make any other related moves during this deal?

Yes. The article notes Blackstone was also close to buying out Centro’s US shopping malls and had purchased A$165 million of Valad’s convertible notes from Kimco Realty as part of its involvement.

If I hold Valad securities, what should I expect now?

Based on the article, the scheme is headed to the NSW Supreme Court for final approval and, if approved, Valad will cease trading on August 12. Holders should watch for official communications from Valad and the registry about the court outcome and next steps, and consider contacting a financial adviser for personal tax or investment guidance.