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What Investors Need to Know about Frasers Centerpoint’s Latest S$3 Billion Bid For Australand Property Group

Australia-based real estate outfit Australand Property Group (ASX: ALZ) has been making frequent headlines since last year.

One of Singapore’s largest property developers, CapitaLand (SGX: C31), used to own 59% of the Australian real estate company. CapitaLand had been seeking buyers for Australand since early last year as it wanted to focus on its core markets of China and Singapore. Earlier this March, CapitaLand finally managed to complete the sale of its entire stake (the company had sold a 20% stake in Australand last November).

But as all these were happening, a major Australian property company, Stockland (ASX: SGP), had expressed interest in taking over Australand. By March this year, Stockland had accumulated a 19.9% stake in Australand and then subsequently launched a full takeover offer in May.

Then yesterday, it was revealed that real estate developer Frasers Centrepoint (SGX: TQ5) had officially joined the bidding war and had proposed to take Australand into its wings.

What is Australand?

Australand is one of Australia’s largest property groups. It has a unique structure as it is formed by the merger of four entities to create a stapled group. The current group consists of Australand Holdings Ltd, Australand Property Trust, Australand Property Trust No.4 and Australand Property Trust No. 5.

The group has interests in areas such as the development of residential, commercial and industrial real estate. Australand also has a large investment property portfolio in Australia’s biggest cities that’s valued at a collective A$2.4 billion as of the end of 2013.

Details of Frasers Centrepoint’s offer

Frasers Centrepoint has offered to buy up Australand at A$4.48 per stapled security in a full-cash deal. That’s 3% higher than the price that Stockland’s offering. Furthermore, Stockland is using its own shares as currency for the bulk of its bid and that can be less attractive than the cash deal proposed by Frasers Centrepoint.

The deal from Frasers Centrepoint values Australand at A$2.6 billion (roughly S$3.0 billion) and is 22% higher than the target’s net tangible assets. Stockland’s offer, meanwhile, pegs the whole of Australand at A$2.52 billion.

Foolish Summary

When CapitaLand sold its stake in Australand, the company had mentioned that market conditions in Australia were good and it had planned to use the proceeds from the sale to repay some of its borrowings as well as invest in projects in China and Singapore.

With its latest proposal, Frasers Centrepoint might just be thinking that even better market conditions for Australia are ahead.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Stanley Lim owns Frasers Centrepoint.