At last, a strong statement against the supposed inevitability of takeovers in the Australian property sector: the statement by the independent appraisers of Stockland Group’s presumed takeover-by-right of General Property Trust.
The same inevitability has been evident elsewhere, particularly in the US where, once a bid has been made, it’s accepted that the target will be taken over by someone – not necessarily the initial bidder, but the target is in play and a change of ownership will occur.
Only occasionally has this been successfully fought.
A notable defence was that of Taubman Centres, the US mall business which used fair means & foul to ward of the unsolicited attentions of Simon Property Group and Westfield Group.
Taubman’s basic argument was that these predators wouldn’t improve the business and, although they could show the overall picture would be prettier for their own share & unitholders, they were never able to disprove the Taubman argument.
In Australia, Centro tried to take over the AMP Shopping Centre Trust but was thoroughly beaten by Westfield, which then allotted the malls it didn’t want to others, including Centro.
“No compelling reason to accept Stockland offer”
Now, Grant Samuel & Associates Pty Ltd’s assessors have said of the Stockland bid for GPT: “There are no compelling reasons to accept the Stockland offer in its present form at the present time.
“By not accepting the Stockland offer, GPT unitholders will leave GPT in play and possibly encourage Stockland to lift its offer. There is no imperative to act quickly. Unitholders should wait to see what other proposals emerge.”
The first part of the Grant Samuel appraisal restates the Taubman argument: If they’re not going to be better for you, tell them to go away.
The next part gives in to the accepted philosophy that takeover by somebody is enevitable: “Unitholders should wait to see what other proposals emerge.”
GPT has been managed by Lend Lease, which thought a merger of the pair’s interests was – by decree of a Lend Lease board and a GPT board swayed by Lend Lease interests – also in GPT’s interests.
Investors said otherwise. Lend Lease’s board cried. They said this despicable rejection was handing GPT to Stockland on a platter.
But why should anybody hand anything to anybody on a platter? Stockland’s offer was worse than Lend Lease’s, just with different management.
Westfield has bought 6.5% of GPT, and Grant Samuel has said in its report “the potential for alternative proposals to emerge remains. Lend Lease will inevitably continue to have a vital interest in GPT’s future. The Westfield Group has disclosed a significant holding of GPT units (6.5%) but has not indicated its position regarding GPT.”It is difficult to recommend the Stockland offer as fair when it is demonstrably inferior in value terms to the Lend Lease proposal which was rejected by GPT unitholders (albeit by a minority of unitholders).”
Value assessment
On the value of the Stockland offer, Grant Samuel said in its view, “Stockland securities are likely to trade at a yield of 6.7-6.9% post the acquisition of GPT, implying a price in the range of $A5.75-5.90/stapled security. On this basis, the value of the Stockland offer is $A3.50-3.59/GPT unit.
“Based on the weighted average market price of Stockland securities since the announcement of its offer of $A5.90, the ‘see through’ value of the Stockland offer is $A3.53/GPT unit after adjusting for differences in distribution entitlements.”Grant Samuel also noted that the value of Stockland’s offer exceeded both its estimate of the price range within which GPT units would probably trade on fundamentals in the absence of any takeover (of $A3.20-3.25) & GPT’s nta/unit (of $A2.74) at 30 June 2004.
Websites: GPT, Grant Samuel report
