Stockland may revise Australand bid

Stockland CEO says the suitor may revise its takeover offer for Australand to include cash as well as scrip.

Stockland chief executive Mark Steinert says the nation’s largest housing developer will “potentially” work with a partner to launch a revised proposal for Australand comprising some cash after its $2.4 billion conditional scrip bid was flatly rejected yesterday by its rival.

Stockland’s proposal to buy the diversified developer equated to $4.20 a security, a 1.9 per cent discount to Australand’s $4.28 closing price on Tuesday. Australand managing director Bob Johnston rejected the bid but was open to further talks.

“The board has thoroughly reviewed the proposal and doesn’t think it is compelling for Australand securityholders. So on that basis, we have determined it is ­appropriate to reject it,” Mr Johnston said.

The highly anticipated bid has been on the cards for some time and comes after Stockland purchased a 19.9 per cent stake in Australand in March.

Rather than searching for a partner to jointly embark on the deal, as was speculated, Stockland fielded approaches from interested parties once the bid had been made.

With the support of another group, cash could potentially be offered, Mr Steinert said.

“We are highly confident we are able to divest any non-core holdings going forward. We have been approached by numerous parties,” he said. Whether the bid proceeded was up to shareholders, a number of whom held stock in both companies.

“There is a concentrated register and cross ownership. It is really going to boil down to how investors see the future,” he said. “If investor price expectations are too high, we will sell and realise a profit on our 19.9 per cent holding.”

Stockland has offered 1.111 securities for every Australand unit, equating to $4.20, based on Stockland’s share price of $3.78. Australand said yesterday it would not be granting due diligence to its rival, one of the conditions of the deal proceeding, along with 90 per cent shareholder acceptances.

Stockland said a tie-up with Australand would offer annual synergies of at least $15 million, in an approach some say resembles Myer’s recent unsuccessful play for David Jones.

Takeover speculation has been factored into the target’s share price since July, whenThe Australian first flagged that a bid was in the wings, sources close to Stockland had argued, adding that the bid was in fact an 18 per cent premium to its $3.56 net tangible asset backing.

Then, Stockland was working on a proposal, but advisers held fire when majority shareholder CapitaLand said it wanted to retain its 60 per cent stake, which was subsequently sold.

Mr Steinert said Stockland entered Australand’s dataroom when it was opened last year following a partial takeover bid by the GPT Group. It now sought to carry out further due diligence after being refused requests at that time for information on factors such as historical residential property sales rates and revenue.

Shares in Australand yesterday closed 5c lower to $4.23, while Stockland shares closed down 2c to $3.76.

Australand’s business comprises a $2.4bn portfolio of office and industrial properties, $767m of residential properties and $287m of projects under development. Fort Street Advisers, Macquarie Capital and law firm King & Wood Mallesons are advising.

Stockland, with an $8.7bn market capitalisation, is a diversified developer and investor in office, industrial, residential, retirement and retail property. It is working with UBS, Citi and Bank of America Merrill Lynch.

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