New bid for Australand may be joint venture
GPT waded into the fray in December with an indicative non-binding offer for Australand's commercial and industrial assets, which was rejected.
Although no price was made public, Australand's directors said the "indicative" value proffered by GPT was too low.
The concern was that Australand would be left with its business at a time when the housing market is under pressure.
Analysts have now said that with Australand's major shareholder, CapitaLand, a seller of its stake, another bid could be in the wings from GPT in a joint venture deal.
Possibly an Asian investor would buy the housing business, leaving GPT with the office and retail assets.
According to John Kim of CLSA, a total acquisition price for Australand's investment property and commercial and industrial portfolio would be about $2.9 billion (including transaction costs of about $96 million), representing about a 5 per cent premium to estimate of book value of $2.6 billion.
The bid would likely be 100 per cent cash, but would be funded with about 65 per cent in equity through a raising and the rest in debt. "We believe it would be unlikely for GPT to pay a premium greater than 10 per cent."
Frequently Asked Questions about this Article…
In December GPT made an indicative, non-binding offer for Australand's commercial and industrial assets. Australand's board rejected the approach, saying the indicative value was too low. No public price was disclosed.
Yes. Analysts have suggested GPT might pursue another bid in a joint venture arrangement — possibly partnering with an Asian investor to buy Australand's residential business while GPT takes the office and retail assets.
Directors were worried the indicative offer undervalued the business and could leave Australand holding its housing business at a time when the housing market is under pressure, which would be risky for the company.
CLSA analyst John Kim estimated a total acquisition price of about $2.9 billion, which includes roughly $96 million of transaction costs — around a 5% premium to an estimated book value of $2.6 billion.
The expected structure would be a 100% cash bid funded with roughly 65% equity raised and the remainder financed with debt. CLSA also noted it would be unlikely for GPT to pay a premium greater than 10%.
The article says a number of Asian-based investors are said to be interested, particularly in Australand's residential/housing business.
GPT's interest has been in Australand's commercial and industrial assets — essentially office and retail properties — while the residential/housing arm might be sold to another investor.
Investors should watch for any firm or binding offer from GPT or a joint-venture announcement, developments around major shareholder CapitaLand potentially selling its stake, and confirmation of who might buy the residential assets and how any deal would be financed.
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