Retirement village operator Stockland has acquired a significant stake in investment and property group FKP.
Stockland today took a 5 per cent stake in FKP via a share placement and will acquire up to 13 per cent of the listed business through the partial underwriting of a rights issue at $1.50 per security, the group said.
The 5 per cent stake will be acquired at a total consideration of $28 million at $2.00 per stapled security. On completion of the agreement, Stockland will have a stake in FKP of between 10 and 13 per cent, for a total outlay of around $80 million.
The move follows Stockland taking a 14.3 per cent stake in Aevum earlier this week.
Meanwhile, FKP will conduct a strategic review of its operations, which could lead to further opportunities for Stockland, with the latter being given first right of refusal over the purchase of FKP’s retirement assets. Such a transaction would lead to a restructure or demerger of FKP’s retirement business.
In light of these changes, FKP said it believes “it is no longer appropriate to maintain specific profit guidance for the financial year ending 30 June 2009”.
The group has also revisited its distribution policy and will retain “the majority” of cash earnings to repay debt and fund working capital requirements.
“For the interim distribution period for the period to 31 December 2008, FKP will distribute 100 per cent of taxable earnings from the FKP Property Trust but will pay no dividend from FKP Limited,” the group’s statement to the Australian Securities Exchange said.
FKP will now conduct an accelerated non-renounceable entitlement offer in an effort to raise up to $150 million with an issue of approximately 100 million securities at a fixed price of $1.50.
FKP’s largest security holder, Mulpha Australia, and Stockland have committed to subscribe to 35 and 34 million securities respectively.
FKP said the Stockland placement and entitlement offer combined would raise a minimum of $132 million for the group, which will in part be used to reduce pro-forma gearing to 35 per cent.
Although the Stockland $2.00 price represents a 33 per cent premium on FKP’s recent trading price, it is less than half the offer made to the group by Lend Lease earlier this year of $5.00 per security.
At the time, FKP said the offer substantially undervalued the group and its future prospects. But today FKP managing director and chief executive Peter Brown said the Stockland relationship “reflects the underlying value of FKP and the quality of our assets and businesses”.
The Lend Lease offer was, however, for all the securities in the group.
At the time FKP chairman Ben Macdonald said the group was in a strong financial condition and set to deliver strong earnings growth from FY2009 onwards.
But more recently the group has taken a cautious approach to profit statements as a result of the credit market turmoil.
