LEND Lease is slowly increasing its stake in Babcock & Brown Communities whilst Leighton Holdings continues to reinforce its interest in Devine Limited.
Lend Lease yesterday spent $3 million to buy 7.09 million shares in BBC, bringing its total voting power in the group to 7.27%.
And Leighton has bought an addition 3.59 million shares to increase its shareholding in Devine to 43.39%.
Leighton has also exercises its right to acquire shares via existing pre-emptive agreements with Devine’s managing director David Devine and director Ken Woodley which total 14.64%.
Leighton’s planned takeover of Devine looks close to the finish line, the group’s relevant interests in Devine have increased to 58.03%.
If Leighton were to make a takeover offer, the deal will most likely go forward as it only needs the backing of David Devine, who has a 25.31% shareholding through his private company Devine Industries as well as another 8.24% shareholding held by another company Larrapinta Pty Ltd.
Together with Leighton, the three major shareholders have a 91.3% shareholding in Devine.
But the path for Lend Lease will not be as easy.
Last week, analysts said whilst BBC would be a perfect fit for Lend Lease, there are major impediment to a takeover.
Merrill Lynch’s John Richmond said BBC’s Management Agreement and Financial Advisory Agreement with Babcock & Brown remain in place under a change in control.
“Lend Lease is therefore unlikely to gain the management rights to the assets without Babcock & Brown’s approval,”
The base management fee is 0.5% of adjusted gross assets. In addition to this, Babcock & Brown is also entitled to a Responsible Entity fee of 2% of gross assets (currently being waived by BNB) as well as ongoing Financial Advisory fees and Origination and Disposition fees.
“The cost to purchase these rights may be far greater than the market cap of BBC, eroding any accretion from a take-over. For example, applying a 12x multiple on the Management and RE fees (2.5% on $2.7 billion of assets) equates to $810 million, significantly higher than BBC’s $296 million market cap,” he continued.
“Only 4% of Australians over 65-years live in villages versus 12% in the
“In addition, Lend Lease is unlikely to achieve its targeted 10% growth rate in the coming years due to worsening fundamentals in AU, the United Kingdom and the US (we forecast -2% growth in FY09).
“An accretive acquisition could partially offset weakness in other businesses. Finally, with gearing of 15%, Lend Lease has $3 billion of capacity which would allow for a largely cash-based bid,” he concluded.
Australian Property Journal
