Orchard is the flavour of the week

THE battle for control of the property investor Orchard Funds Management stepped up a gear yesterday with suggestions that funding for the deal must be in place sooner than previously announced.

By InvestSMART · 16 Jun 2010

By InvestSMART ·
16 Jun 2010

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THE battle for control of the property investor Orchard Funds Management stepped up a gear yesterday with suggestions that funding for the deal must be in place sooner than previously announced.

Insiders said yesterday that Brisbane's Cromwell Group had until Friday to make a firm proposal for Orchard, but Orchard's managing director, David Hinde, denied this.

Orchard granted Cromwell an exclusive due diligence period of 30 days, which began last Wednesday. Cromwell aims to conclude the deal by the end of September.

But Taemas Bridge, a private property investment group led by the former Babcock & Brown executive Robert Topfer, has $100 million-plus immediately available and is said to be eager to secure Orchard.

Mr Hinde said the Cromwell proposal would involve a transfer of the management rights of all of Orchard's managed funds with the exceptions of the Essential HealthCare Trust and the Orchard Primary Infrastructure Fund. Both are subject to separate offers now being evaluated by Orchard Funds Management. Mr Hinde said Orchard would issue a statement to investors on its website to clarify the current market speculation.

Cromwell has indicated it will pay shareholders an initial $15 million for Orchard Funds Management.

However, market observers said any move on Orchard Funds Management would require additional capital.

Insiders believe stabilising Orchard's main fund and its associated investments could cost a friendly bidder more than $80 million.

Cromwell's chief executive, Paul Weightman, said the group planned to broaden its base of unlisted funds this year. It is also close to buying Qantas's headquarters at Mascot in a deal valued at about $140 million.

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Frequently Asked Questions about this Article…

What is the takeover situation involving Orchard Funds Management?

Orchard Funds Management is in the middle of a takeover battle. Brisbane‑based Cromwell Group has an exclusive 30‑day due diligence period that began last Wednesday and aims to conclude a deal by the end of September, while private buyer Taemas Bridge has also expressed interest.

Who are the main bidders for Orchard and who leads them?

The two main parties mentioned are Cromwell Group and Taemas Bridge. Cromwell is a listed property group, while Taemas Bridge is a private property investment group led by Robert Topfer, a former Babcock & Brown executive.

What has Cromwell offered for Orchard and what would the deal involve?

Cromwell has indicated it will pay shareholders an initial $15 million for Orchard Funds Management. Cromwell’s proposal would involve transferring the management rights of most of Orchard’s managed funds, with a couple of named exceptions.

Which Orchard funds are excluded from Cromwell’s proposed takeover?

Cromwell’s proposal would exclude the Essential HealthCare Trust and the Orchard Primary Infrastructure Fund. Those two vehicles are subject to separate offers that Orchard is currently evaluating.

Does Taemas Bridge have funding available and how does that affect the Orchard deal?

Insiders say Taemas Bridge has more than $100 million immediately available and is eager to secure Orchard. Market observers note that any bid for Orchard would likely require additional capital beyond an initial payment.

How much might it cost to stabilise Orchard’s main fund and related investments?

Insiders believe stabilising Orchard’s main fund and associated investments could cost a friendly bidder more than $80 million, indicating that buyers may need significant extra capital beyond headline offers.

What is Cromwell’s broader strategy and are they pursuing other property deals?

Cromwell’s chief executive, Paul Weightman, said the group plans to broaden its base of unlisted funds this year. The article also notes Cromwell is close to buying Qantas’s Mascot headquarters in a deal valued at about $140 million.

What should everyday Orchard investors watch for next?

Orchard’s managing director David Hinde said the company will issue a statement to investors on its website to clarify market speculation. Investors should monitor Orchard’s official updates, outcomes of the 30‑day due diligence, and any announcements about management‑rights transfers or separate offers for excluded funds.