Cromwell Property Group’s board is recommending its security holders reject ARA Asset Management’s proportional offer.
Cromwell said its board considers the offer to buy 29 Cromwell securities for every 100 owned at a cash price of 90c per security “an opportunistic attempt to gain control of Cromwell without offering to acquire all stapled securities or paying an appropriate control premium to Cromwell security holders”.
It said that the offer price “substantially undervalues” the business, its future prospects and represented a material discount to Cromwell’s net tangible assets and ignored the value associated with Cromwell’s funds management business, which had A$8.3bn of funds under management as at the end of 2019.
ARA’s holdings in Cromwell hit just over 24% of its issued share capital on 26 June, while the Tang Group’s holdings were 17.55% on 5 June. Combined the firms hold 41.6% of Cromwell Securities.
If ARA was successful with its offer it would own about 46% giving it effective control and enabling it to replace Cromwell’s board, which ARA has said it intends to do.
ARA has said it is making the offer to protect its investment in Cromwell.
John Lim, chief executive of ARA Group, said: “ARA has been left with no choice but to pursue this course to try and restore value for the benefit of ARA and all security holders in Cromwell.
“We seek change based on our strong belief that the existing Cromwell strategy is failing and exposing our investment to unacceptable risks. This is magnified by poor cost control by management, at times inexcusable largesse, and weak corporate governance.”
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