FCL makes A$2.6b bid for Australand

[SINGAPORE] Singapore developer Frasers Centrepoint Limited (FCL) is taking on Australia's largest property player with a competing proposal to acquire Australand Property Group for A$2.6 billion (S$3 billion) cash.

Its proposed offer price of A$4.48 per stapled security trumps the all-share bid from Stockland, which had revised its offer price to A$4.35 per security.

FCL said its proposal was conditional and non-binding. It has entered into a process agreement with Australand for an exclusive period of four weeks to conduct due diligence before finalising an implementation agreement that is binding.

"The proposal will catapult FCL to become one of Australia's leading real estate companies with a portfolio of scale and quality," said FCL group chief executive Lim Ee Seng, who was in Australia when the announcement was released yesterday.

The proposed deal is touted as "transformational" as it will result in a substantial increase in group assets and earnings. It would grant FCL access to Australand's A$2.4 billion of office and industrial properties and A$9.3 billion of developments pipeline in Australia, one of FCL's core markets since its entry over a decade ago.

Underpinned by strong momentum in its residential division, Australand is expecting its earnings per security this year to grow by 20-25 per cent from 2013 based on a further review of its operating earnings outlook.

Should the proposal become a binding offer, Australand's board intends to recommend the proposal "in the absence of a superior proposal and subject to an independent expert opinion", Australand said yesterday.

Under FCL's proposal, Australand security holders would be entitled to an expected first-half 2014 distribution of 12.75 cents per stapled security and an additional distribution of up to 12.75 cents apiece for second-half 2014 until the offer becomes unconditional.

Australand has been seen as a takeover target since CapitaLand said it wanted to sell its 59.1 per cent stake early last year after a strategic review. The stake was fully divested in two tranches of private placements - at A$3.685 apiece in November and at an average A$3.75 apiece in March this year.

A CapitaLand spokeswoman said the company was not at liberty to disclose the identities of interested parties whom the group held discussions with.

BT understands that apart from a takeover offer or an acquisition approved by resolution of a target company, the stake that can be acquired in the target company cannot exceed 19.9 per cent under Australian takeover rules. FCL would also not have access to Australand's books for due diligence if it was acquiring shares from then-shareholder CapitaLand.

Stockland, which snapped up a 19.9 per cent stake in AustraLand in March, tabled an offer at A$4.20 for each stapled security the following month. But it was prompted to raise its final offer price to A$4.35 apiece when the original bid was rejected by Australand.

Stockland said separately yesterday that its board will consider its options and provide an update in due course.

In the event that FCL's offer becomes binding, Australand could be delisted from the Australian stock exchange if the latter manages to obtain 100 per cent interest in Australand.

FCL, which was spun off as a listing by conglomerate Fraser and Neave in January, now hopes to raise the contribution from overseas properties and increase the proportion of recurring income to about half of group income over the medium term. Its latest proposal, if implemented, is expected to help the group to achieve these objectives in a shorter time.

"We already have an established platform and good brand recognition in Australia, but real estate is a business where scale and depth matter," said Mr Lim. "This proposal will be the catalyst that will help FCL to deepen our roots and accelerate our growth in a market that we believe will continue to offer long-term growth prospects."

The proposed offer price represents a premium of 4 per cent over the last closing price of Australand's stapled securities of A$4.31 each as at June 3 and a 22 per cent premium to Australand's estimated net tangible assets per security of A$3.68 as at June 30.

Deutsche Bank AG and Standard Chartered Bank are the financial advisers to FCL.