ValueBuddies.com : Value Investing Forum - Singapore, Hong Kong, U.S.

I was a little surprised as well. However, ALZ is a sizable Australian integrated property company with 3 main core divisions with focus on mainly residential, industrial properties and small exposure in commercial.

As with Australian companies, the takeover process is never straight forward as it requires the blessing of the board of directors of the target company in order for a successful takeover.

Stockland acquired a beachhead of 19.9% for a start in ALZ but its outstanding share swap offer wasn't even allow a due diligence exercise until it was improved to slightly above A$4.30 with some cash portion.

For Towkay Charoen, I think he is willing to sacrifice the small money in order to see the cards of other players on the table (including ALZ as well) before showing hand. After F&N and APB, we should be well aware of his capability and the continued uncertainties surround his home base Thailand, we should never under-estimate his intentions with all his core assets.

More comments to follow.

GG

(04-06-2014, 08:51 AM)roxhockey Wrote: [ -> ]It's strange that Frasers didn't try to buy some stock after the CapitaLand sell down like Stockland did. Would have given them a stronger bidding position and cheaper economics.

By Nichola Saminather
June 4 (Bloomberg) -- Frasers Centrepoint Ltd., the
Singaporean property company spun off from Fraser & Neave Ltd.,
offered to buy Australand Property Group for A$2.6 billion ($2.4
billion), topping an earlier bid by Stockland.
Frasers made a cash offer of A$4.48 per share, Australand
said today in a regulatory filing, compared with Stockland’s
all-share offer equivalent to A$4.35 per security on May 28, or
A$4.43 based on yesterday’s close. Australand’s board intends to
recommend the offer in the absence of a superior proposal and
subject to an independent expert’s opinion, it said.
The acquisition would allow Frasers, whose Australasian
division is building the A$2 billion Central Park development in
central Sydney, to expand its presence in Australia. A successul
bid by the company, which began trading separately in Singapore
in January, would advance its goal of increasing profit from
overseas.
“The proposal will catapult Frasers Centrepoint to being
one of Australia’s leading real estate companies with a
portfolio of scale and quality,” Lim Ee Seng, chief executive
officer of Frasers Centrepoint, said in a separate statement.
“We already have an established platform and good brand
recognition in Australia, but real estate is a business where
scale and depth matters.”

Exclusivity Granted

Australand said it granted Frasers a four-week period of
exclusivity and that it could no longer open its books to
Stockland. Under Frasers’ offer, Australand shareholders would
retain their expected first-half dividend of 12.75 Australian
cents per share, the Sydney-based company said.
The offer is subject to approval by Australia’s Foreign
Investment Review Board, and the backing of Frasers
shareholders.
“The board concluded that the conditional proposal would
deliver a compelling value outcome for Australand
securityholders and is superior to the final and conditional
proposal received from Stockland,” Australand’s Chairman Paul
Isherwood said in the statement.
The target’s shares have risen 12 percent this year, and
1.9 percent since Stockland made its bid on May 28, to A$4.31.
Frasers Centrepoint shares have gained 30 percent to S$1.925
since it began trading Jan. 9. Stockland shares were 3 percent
higher today at 10:12 a.m. in Sydney, taking this year’s gain to
12 percent.

For Related News and Information:
Stockland Raises Australand Bid, Values REIT at $2.3 Billion
{NSN N69ZYJ6JTSE9<Go>}
Frasers Centrepoint Starts Trading Post Spinoff: Singapore Mover
{NSN MZ4NG66JTSEI<Go>}
GPT Drops Pursuit of Australand Commercial Property Business
{NSN MNG9PU1A1I4H<Go>}
Top Stories:TOP<GO>

To contact the reporter on this story:
Nichola Saminather in Sydney at +61-2-9777-8613 or
nsaminather1@bloomberg.net
To contact the editors responsible for this story:
Andreea Papuc at +852-2977-6641 or
apapuc1@bloomberg.net
Edward Johnson, Iain McDonald

Rival bid emerges for Australand
BRIDGET CARTER THE AUSTRALIAN JUNE 04, 2014 9:42AM

SINGAPORE’S Frasers Centrepoint has launched a $2.6 billion takeover bid for Australand, trumping the recently revised offer by Stockland for the listed real estate business.

Australand announced this morning that it had received a conditional cash bid from Frasers to buy all of the business for $4.48 per share.

Australand said the offer required a period of exclusive due diligence, which it had granted.

It comes after Stockland last week moved a step closer to merging with Australand after its target allowed it to conduct due diligence on the back of its improved offer to $4.35 per share, a price that values the company at $2.5bn.

Stockland also included an alternative proposal that included a lower scrip ratio and a cash consideration of up to $250m.

The approach from Frasers will include the distribution of 12.75c per share for the first half of the financial year, taking its offer to $4.607 plus an additional distribution which accrues to the date the offer from Frasers becomes unconditional.

The additional distribution represents the expected second half distribution for 2014 of 12.75c per share.

The offer is subject to a minimum shareholder acceptance of 50.1 per cent and Foreign Investment Review Board approval.

With Business Spectator

The Australand acquisition is voted down by Mr Market, with close to 1.6% drop in share price.

I am yet to take a look on the offer, is the offer too expensive? Any comment?

(vested)

Let us look at the big picture...

I have already commented that FCL is playing show hand with their good understanding of playing the M&A game down under. They have nothing but obviously watching the bidding war by Stockland ongoing for a while and hence for them to strike at the eleventh hour obviously is to ward off the one and only competition.

They are going for 100%, ie they want a free hand in ALZ's future - personally, they will integrate ALZ's residential portfolio and build FCL's pipeline down under - certainly a better and well regulated environment compared to China. Australia has always been under-supplied and projects take a long time from planning to reach completion - easily 7 to 10 years and hence there is a ready pipeline - some of which already launched and waiting for profit booking.

The other parts of the portfolio will be pipeline potentially for their REIT platform - mianly industrial properties that is enjoying a rare bright spot due to the ecommerce boom globally and in Australia as a continent alone. Small commercial exposure is a blessing since this is probably the toughest.

Capland has built up ALZ since 1998. I have always been puzzled by their intention to sell since last year and felt that perhaps they are more keen on China, hence quite stupid to part with a controlling stake at close to book value.

The maximum cash offer of A$4.6075 (including cash interim dividends) for ALZ represents a 25.2% premium to ALZ's last reported book value of A$3.68. However, it is at a slight premium to Stockland's valuation of A$4.35. If Stockland being one of the established players down under is so keen, why not FCL?

With the deal, FCL will be comfortably ahead of Keppel Land and UOL in terms of asset size. In fact, with the transaction, Towkay's stake in FCL may be diluted via potential new share placement to fund the acquisition.

However, not to forget about the locked in sales over the next 3 years, the asset light plans - all these cash inflow will help to mitigate FCL's burden of acquiring a established platform.

Personally, I do not think that its an overvalued acquisition but a bolt on that Towkay can afford especially in the light of his mega tilts at APB and F&N. I think this is a critical sizable acquisition that will keep FCL going beyond the next 3 years.

TCC Asset is not a greenie or newbie on the block but a relatively unknown private force that is now known through Thai Bev, F&N and latest FCL.

Sit through the short term turbulence - ask yourself can Lim Ee Seng sanction such a deal? Unlikely as the amount at 60% of FCL market cap requires higher authority approval. FCL will become very big that fund managers must have exposure and so far they have ticked the boxes.

Akan Datang
GG

(04-06-2014, 09:31 AM)CityFarmer Wrote: [ -> ]The Australand acquisition is voted down by Mr Market, with close to 1.6% drop in share price.

I am yet to take a look on the offer, is the offer too expensive? Any comment?

(vested)

As a preface to this post I have to say I am not that familiar with Australand's business - that said, normally you would expect Stockland to be a more natural acquirer (ie higher level of synergies) because of the stronger geographic overlap as well as business overlap (Frasers is only big in residential in Aust I believe). Therefore if Fraser does outbid Stockland by a decent margin then that would suggest that Fraser is overpaying.

However, there does seem to be a cost of capital arbitrage for property investment between the Australian and global (esp. asian) markets. Australia is one of the highest yielding property markets amongst developed countries and I think this is one of the reasons you are seeing so much foreign interest in Australian property. If you believe that the Aussie market is wrong on property and that their discount rate is too high, then Frasers may be able to outbid Stockland as their equity funding is essentially cheaper.

The other factor that could contribute to a higher valuation for Fraser is that for Stocklamd, this is probably more of an asset play (buying complementary assets) whereas for Fraser they are buying a presence in the Aust commercial and industrial markets which has strategic value for them.

I'm wary as we all know that M&A usually is value destructive for the acquirer, especially in contested bidding scenarios.

The main question lies in if you have faith in Towkay's acumen - he also pulled off in the bidding war with OUE in F&N and extracted value handsomely.

FCL is the offspring of that bidding war and given that he still owns 88% in FCL, the other question is that will he be shooting himself in his own foot?

Besides that, do you think that his investment banker son-in-law wouldn't have cautioned him in such a bidding war?

Vested & Biased
GG

(04-06-2014, 10:07 AM)roxhockey Wrote: [ -> ]As a preface to this post I have to say I am not that familiar with Australand's business - that said, normally you would expect Stockland to be a more natural acquirer (ie higher level of synergies) because of the stronger geographic overlap as well as business overlap (Frasers is only big in residential in Aust I believe). Therefore if Fraser does outbid Stockland by a decent margin then that would suggest that Fraser is overpaying.

However, there does seem to be a cost of capital arbitrage for property investment between the Australian and global (esp. asian) markets. Australia is one of the highest yielding property markets amongst developed countries and I think this is one of the reasons you are seeing so much foreign interest in Australian property. If you believe that the Aussie market is wrong on property and that their discount rate is too high, then Frasers may be able to outbid Stockland as their equity funding is essentially cheaper.

The other factor that could contribute to a higher valuation for Fraser is that for Stocklamd, this is probably more of an asset play (buying complementary assets) whereas for Fraser they are buying a presence in the Aust commercial and industrial markets which has strategic value for them.

I'm wary as we all know that M&A usually is value destructive for the acquirer, especially in contested bidding scenarios.

(04-06-2014, 09:31 AM)CityFarmer Wrote: [ -> ]The Australand acquisition is voted down by Mr Market, with close to 1.6% drop in share price.

I am yet to take a look on the offer, is the offer too expensive? Any comment?

(vested)

Capitaland completely exited Australand just 3 months back at price of A$3.75.

(04-06-2014, 10:49 AM)kichialo Wrote: [ -> ]

(04-06-2014, 09:31 AM)CityFarmer Wrote: [ -> ]The Australand acquisition is voted down by Mr Market, with close to 1.6% drop in share price.

I am yet to take a look on the offer, is the offer too expensive? Any comment?

(vested)

Capitaland completely exited Australand just 3 months back at price of A$3.75.

I can hear Capitaland sobbing sound.....

(04-06-2014, 10:34 AM)greengiraffe Wrote: [ -> ]The main question lies in if you have faith in Towkay's acumen - he also pulled off in the bidding war with OUE in F&N and extracted value handsomely.

FCL is the offspring of that bidding war and given that he still owns 88% in FCL, the other question is that will he be shooting himself in his own foot?

Besides that, do you think that his investment banker son-in-law wouldn't have cautioned him in such a bidding war?

Vested & Biased
GG

(04-06-2014, 10:07 AM)roxhockey Wrote: [ -> ]As a preface to this post I have to say I am not that familiar with Australand's business - that said, normally you would expect Stockland to be a more natural acquirer (ie higher level of synergies) because of the stronger geographic overlap as well as business overlap (Frasers is only big in residential in Aust I believe). Therefore if Fraser does outbid Stockland by a decent margin then that would suggest that Fraser is overpaying.

However, there does seem to be a cost of capital arbitrage for property investment between the Australian and global (esp. asian) markets. Australia is one of the highest yielding property markets amongst developed countries and I think this is one of the reasons you are seeing so much foreign interest in Australian property. If you believe that the Aussie market is wrong on property and that their discount rate is too high, then Frasers may be able to outbid Stockland as their equity funding is essentially cheaper.

The other factor that could contribute to a higher valuation for Fraser is that for Stocklamd, this is probably more of an asset play (buying complementary assets) whereas for Fraser they are buying a presence in the Aust commercial and industrial markets which has strategic value for them.

I'm wary as we all know that M&A usually is value destructive for the acquirer, especially in contested bidding scenarios.

deep down inside you know they are paying a high price, you wish they not do this deal instead

short FCL