Minnow makes a move on BBC

The move by Queensland-based Prime comes as Babcock & Brown Communities, a satellite of the once-great investment bank, is under siege.

Consolidation and mergers are becoming a daily occurrence in the retirement and aged care property market and a link-up of BBC, Prime and their rival Aevum has been widely suggested.

This has not been lost on Lend Lease, which owns 7.6 per cent of BBC and is in talks with the property group FKP about a possible merger to expand its interest in the aged care sector.

Babcock & Brown, which manages BBC, has put its 10 per cent management rights up for auction. It has valued these at $17.5 million.

The Macquarie Equities analyst Callum Bramah said in a note to clients: "We believe Lend Lease have not acquired a passive interest in BBC and will seek to acquire the group."

BBC is conducting a "price discovery" through a data room. Lend Lease and fellow property groups Stockland and Mirvac are said to be going over the numbers.

Last night BBC investors expressed surprise that Prime, which is far smaller than BBC, had made the move. Prime has not previously approached BBC's advisers, ABN Amro, to enter the data room.

Babcock & Brown is cutting back its interests in its satellites in a restructure triggered by the global credit crisis.

Prime has launched an all-scrip offer to buy 40 per cent of BBC and build a strategic stake; if successful it plans to work with BBC's management towards a full merger. It is offering one of its units for each BBC stapled security to gather the 40 per cent interest.

The offer puts BBC shares at 47.5c, valuing the entity at $306.57 million. BBC closed yesterday at 49.5c, up 1c, giving it a market value of $322.61 million. Prime lost 2.5c to 43.5c, giving it a value of $246.883 million.

Prime and BBC are already linked through management agreements for 25 facilities, which Prime leases to BBC or are managed by BBC.

BBC's management said the offer was "opportunistic and hostile" and advised investors to do nothing until directors had reviewed it.

But last night Prime's managing director, Philip Powell, disagreed the offer was hostile.

"Yes, it's unsolicited," he said. "But BBC is having a strategic review, Babcock & Brown is selling the management rights and, while we could have gone through the data room, we threw our hat in the ring.

"We would have liked to do this earlier. Lend Lease has made it clear it's interested with its stake in BBC and its talks with FKP, but we decided to wait until reporting season was over. Now it is and here is the offer."

Prime had concerns about how the leasing agreements were being interpreted and managed by BBC, he said. "Merging the assets and operations together will assist in removing such concerns and provide improved operational outcomes."