Cromwell Corporation has unveiled plans to merge its unlisted property trusts to form a new $1 billion stapled property group.
The proposal will see the merger of Cromwell Diversified Property Trust and five unlisted syndicates including Mary Street, Goulburn Street, Northbourne, Top and Cromwell Planned Investment Number Three syndicates.
CDPT was established in 2002 with a 10 year closed term, the trust has 21 property assets of $724.4 million making it the largest unlisted property fund in Australia. In addition, the trust also has an indirect interest in seven other properties via two Cromwell syndicates and investment in new unlisted Cromwell Property Fund.
The five unlisted syndicates were launched between 1999 and 2002 and have a total property value of approximately $215 million with 2,190 investors.
Cromwell’s chairman Paul Weightman said the new Cromwell Group would have a market capitalisation of between $720 million and $780 million, with property assets throughout Australia in excess of $1 billion.
He added that the new group would be an internally managed.
“This is a very exciting and important milestone for Cromwell shareholders and fund investors, effectively aligning the interests of all stakeholders.
“If approved, the merger and stapling will build scale and fully integrate the core business activities of Cromwell, CDPT and the five syndicates, positioning the Cromwell Group to take advantage of future growth opportunities,” he added.
Weightman said the potential benefits of the merger and stapling to shareholders and investors included a re-rating and improved liquidity, the opportunity for syndicate investors to recognise and achieve value for capital growth whilst providing for capital gains tax rollover relief and greater certainty of earnings for Cromwell shareholders with more predictable and higher distributions.
For CDPT and syndicate investors, Weightman said an investment in an open ended vehicle, rather than the current fixed term structure, will provide additional growth opportunities.
Cromwell has forecast an annualised distribution of 9 cents per stapled security for the period ending 30 June 2007, if the proposals are successful.
An Independent Expert’s report prepared by PricewaterhouseCoopers Securities Ltd has concluded that the merger and stapling proposals are in the best interests of shareholders, unitholders and members. PwC has valued the stapled securities between $1.04 and $1.12 each, an effective distribution yield of 8.0% to 8.7% pa.
Each Cromwell shareholder will receive between 0.8879 and 0.8917 stapled securities for each share they hold depending on the number of syndicates that merge with CDPT. CDPT unitholders will receive one stapled security for each unit they own, including bonus units issued to registered CDPT unitholders prior to the implementation of the proposals.
The proposals have the unanimous support of the directors of Cromwell and Cromwell Property Securities Limited, the responsible entity of CDPT and the syndicates.
The proposals will be effected through a Court approved scheme of arrangement between Cromwell and its ordinary shareholders. Cromwell has sought leave to file its application with the New South Wales Supreme Court yesterday, and the Court is expected to hear Cromwell’s application during the week.
Subject to Court approval, meetings for ordinary shareholders are expected to be held in early December 2006. If the merger is approved, the stapled entity it expected to start trading on December 21, 2006.
By Adam Parsons
