This article is from the Australian Property Journal archive
RETIREMENT and aged care property group Aevum has rejected Stockland’s $266 million takeover bid for the company.
Stockland yesterday made an unsolicited $1.50 per share all-cash off-market offer which if successful, would almost double the size of Stockland’s retirement living business.
Stockland bought an initial 14.4% stake in Aevum for $1.50 per share, or $26.9 million, in October 2008. Following Aevum’s merger with IOR Group in early 2010, this stake was diluted to 10.1%. Stockland has increased its relevant interest in Aevum by 5.8% to 15.9% following recent off-market purchases at a price of $1.50 per share.
Aevum currently has 29 retirement villages totalling 3,100 units and 367 aged care beds in its portfolio after merging with IOR Group, which effectively doubled the company’s business.
The properties are dispersed across Australia including 17 in New South Wales, 12 in Victoria, Queensland, South Australia and Western Australia. In addition, Aevum has a development pipeline of around 800 brownfield development units.
Based on the closing share price of Aevum on 30 July 2010 of $1.09, Stockland’s offer is compelling and represents a substantial premium of:
• 37.6% to the closing price;
• 40.2% to Aevum’s one month Volume Weighted Average Price (VWAP); and
• 32.7% to Aevum’s three month VWAP.
The offer is subject to minimal conditions including a 50.1% minimum acceptance.
Stockland’s managing director Matthew Quinn believes this is a compelling offer for Aevum shareholders, providing a significant premium to the current market value of the shares and certainty of value through an all-cash offer.
He also said the retirement living industry is highly fragmented, and consolidation is beneficial for the long-term sustainability and prosperity of the sector.
“The proposal was put to the Aevum Board on 30 July 2010. Stockland looks forward to a constructive dialogue with the Aevum Board,” he added.
But the board of Aevum has been quick to reject Stockland’s bid and urged shareholders not to take action at this time.
Aevum chairman Graham Lenzner said the bid is unsolicited non-binding and incomplete proposal.
“The Aevum board has carefully considered Stockland’s unsolicited and opportunistic proposal and believes that it significantly undervalues Aevum,” he added.
Yesterday Aevum shares soared 41.74% or 46 cents to close at a $1.55 – just shy of the 52-week high price of $1.67 on the trade of $17.24 million worth of shares.
Stockland’s proposal represents a substantial discount to Aevum’s net tangible assets which was $2.07 as at December 31 2009. Aevum also recently upgraded its FY2010 operating cash flow guidance to $24.4 million, 15% above FY2009.
If successful, Stockland said the transaction would be fully funded ample cash reserves, and undrawn and available debt facilities. Proforma net gearing would increase around 2% from a conservative 18% at 30 June 2010 to around 20%. The acquisition would be EPS neutral in FY11 and approximately 2% accretive in FY12, and is expected to deliver a cash return on investment1 of around 8.5% by FY13.
Australian Property Journal