Frasers enters Australand battle with $3 bil offer: Update

Frasers Centrepoint offered to buy Australian developer Australand Property Group for A$2.6 billion ($3 billion) in the Singapore real-estate company’s biggest proposed acquisition, trumping a bid by Stockland.

Frasers offered A$4.48 per share, Sydney-based Australand said today in a regulatory filing, compared with Stockland’s A$4.43 all-share bid. Shares of Australand, whose board said it intends to recommend the offer in the absence of a superior proposal, were on track for their biggest gain since December 2012 in Sydney. Frasers shares had the biggest drop in four months in Singapore.

The acquisition would give Frasers control of Australand’s A$2.4 billion of office and industrial properties and A$9.3 billion of developments in Australia, where the Singapore company is already building the 2,000-apartment Central Park project in downtown Sydney. Frasers is seeking to boost its operations in faster-growing overseas markets, which contributed 38% of earnings as of March 31 from 10% a year earlier, and has flagged Australia and China as preferred destinations.

“Australia is a market that Frasers understands well,” said Goh Han Peng, a Singapore-based analyst at DMG & Partners Securities Pte.“This bid helps them diversify further out of the challenging Singapore market.”

Australand rose 5.9% to A$4.565 at 12:54 p.m. in Sydney. Frasers shares declined 2.9% to $1.87, the biggest drop since Feb. 4.

HOME PRICES

Private home prices in Singapore dropped by the most in almost five years in the first quarter following a campaign that started in 2009 to curb property speculation. Dwelling prices in Australia’s biggest cities rose 10.7% in May from a year earlier, according to the RP Data-Rismark Home Value index.

CapitaLand, formerly Australand’s biggest shareholder, sold its 39% stake in the company in March.

Australand was a financial investment for CapitaLand, which shifted its focus to Singapore and China after Chief Executive Officer Lim Ming Yan took over in January 2013, DMG’s Goh said. Australia is one of Frasers’s core markets, so an expansion is logical, he said.

STOCKLAND OFFER

Stockland bought 19.9% of the Sydney-based company on CapitaLand’s exit, and followed that with an all-share bid equivalent to A$4.20 a share, which Australand rejected on April 23. It returned with a sweetened bid that equated to A$4.35 a share on May 28 and A$4.43 based on yesterday’s closing price, gaining access to Australand’s books.

Australand revoked that access today, saying it has granted Frasers a four-week period of exclusivity. Under Frasers’s offer, Australand shareholders would retain their expected first-half dividend of 12.75 Australian cents per share, the Sydney-based company said. They would also receive an additional payout equal to the same amount pro-rated from July 1 until the offer becomes unconditional, it said.

“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 Chairman Paul Isherwood said in the statement.