Point of no return: Frasers Centrepoint clinches 56.8% of Australand shares in $2.4b takeover bid

The offer has turned unconditional yesterday.

There’s little to stop Frasers Centrepoint’s audacious $2.4b takeover bid of ASX-listed Australand Property group, as the offer turned unconditional after 56.8% of Australand’s shareholders accepted the offer yesterday.

The offer period will be extended by 14 days to 21 Aug 2014. According to CIMB, this move will help FCL to replenish its depleting landbank, while at the same time increase its recurring income and presence in a core market.

“FCL is a good timer of the Singapore residential market, having presold most of its existing landbank
ahead of the weakness. Given ALZ’s landbank with A$7.5bn of gross development value and pick-up in the Australian residential market, we believe that this is an opportune time for FCL to replenish its depleting landbank,” noted the report.

Here’s more from CIMB:

FCL has fallen ~11% since the ALZ takeover announcement, and now trades at 42% discount to its RNAV (not factoring in the positive accretion from ALZ).

While we note the risks of increased net gearing and overseas presence, we believe the takeover is net positive. FCL is expected to undertake a strategic review of ALZ, and may possibly shed more light on its
future plans for ALZ thereafter.

This can be a key catalyst, allowing investors to understand its rationale as well as its future plans to unlock ALZ’ value.

We expect a 3-5% accretion to FY14 EPS and RNAV, if FCL acquires 56.8-100% of ALZ. While the 3-5% accretion seems marginal, we believe that we have been fairly conservative as: 1) we have yet to factor in potential synergies, 2) we have only factored in a 30bp compression in cap rates from end-2013; cap rates have already compressed by 28bp as at end-Jun 14, and 3) the potential sale of assets at higher prices could help to unlock value.