KPMG puts fair value at $A1.01
Australian Growth Properties Ltd independent directors Rod McGeoch (chairman) & David Cooper said today they would resign within a month of the 14 November close of Trans Tasman Properties Ltd’s takeover offer.
Their decision is in the target statement released by the Australian Stock Exchange late this afternoon Sydney time. They said they would resign, whether Trans Tasman moved to compulsory acquisition or not. Trans Tasman currently has 65.84% of AGP, up from just over 50% when it launched the A85c/share (cum dividend) bid.
The 2 independent directors were outvoted by Trans Tasman/SEA Holdings interests on the board in a 23 September meeting on future strategy.
They said in the target report they had put forward 5 options for the company, all rejected. These included a special dividend or return of capital by way of a buyback.
The assessment by KPMG Corporate Finance, which did the independent appraisal for the 2 minority directors, said the offer was not fair but reasonable. KPMG put the value of AGP at $A1.01 â€“ based on 100% ownership. Net tangible asset backing is $A1.02.
The independent directors said surplus cash â€“ A84c/share â€“ would increase as remaining property assets were realised, so AGP should have implemented any 1 of the 5 specifically formulated alternatives to return more than the bid figure of A85c/share to minority shareholders.
However, given the intransigence of the SEA interests at AGP, the independent directors decided to sell the shares for which they are responsible and to recommend to minorities that they accept the offer. They said that if Trans Tasman didn’t proceed to compulsory acquisition, locking in remaining minorities, the market share price was likely to be below the offer price.
In their reasons tabled at the 23 September board meeting, the independent directors said AGP should soon have more than A90c/share asset backing in cash, the company had been reluctant to reinvest its increasing cash reserves over the past 2 years and, if money wasn’t being invested, it should be returned to shareholders.
They didn’t support the new strategy option of investing outside Australia â€“ probably in Asia: “The company was established to invest in Australia. Sufficient opportunities should exist in Australia to reinvest and this is considered preferable to changing the company’s activities by including investment in offshore markets which are assumed to be Asian-based (1 of the key proposed strategies).
“This is considered a potentially high-risk strategy for AGP â€“ we are aware of few Australian property investors/developers which have been successful in Asia. The offshore investment strategy is not supported.”
This statement form the independent directors was made without reference to the Asian links AGP has â€“ ultimate controlling shareholder Jesse Lu, managing director of SEA Holdings, is based in Hong Kong.
The independent directors did find appeal in the new strategy of pursuing opportunistic investment classes, but felt this was best left to larger individual investors in AGP allocating their investments directly into identified transactions â€“ which might be managed by AGP â€“ rather than investing via AGP.
The independent directors said that despite their recommendation to accept the offer, small shareholders might still want to hang in on the chance that, if Trans Tasman ends up using the “creep” provisions of the Corporations Act to complete its takeover, a price higher than A85c/share might well end up being paid.
KPMG’s report sets out the relative sizes of the 3 group companies: AGP, owned 50.1% (now about 65%) by Trans Tasman, had market capitalisation of $A250.4 million on 26 September.
Trans Tasman, 55.16% owned by SEA, had market capitalisation of $NZ190,.3 million on 5 September.
SEA had market capitalisation of $HK731.1 million on 26 September.
Previous story: Trans Tasman pursues full control at Australian Growth