Stockland Announces Cash Offer for Aevum

Stockland has announced an attractive $1.50 per share all-cash off-market offer to acquire retirement village operator, Aevum. The offer values the total equity of Aevum at $266 million and, if successful, would almost double the size of Stockland’s Retirement Living business.

Based on the closing share price of Aevum on 30 July 2010 of $1.09, Stockland’s offer is compelling and represents a substantial premium of:

• 37.6% to the closing price;
• 40.2% to Aevum’s one month Volume Weighted Average Price (VWAP); and
• 32.7% to Aevum’s three month VWAP.

Stockland has increased its relevant interest in Aevum by 5.8% to 15.9% following recent off-market purchases at a price of $1.50 per share.

Stockland Managing Director Matthew Quinn said the recent acquisition of additional shares indicated strong market support for the offer price and confirmed that Stockland’s offer represented value for Aevum shareholders.

The offer is subject to minimal conditions, regulatory and other approvals, including a 50.1% minimum acceptance condition; no prescribed occurrences; no material adverse changes; and no specified index decline.

Full details of the conditions of the offer are set out in the appendix to this announcement.

“We believe this is a compelling offer for Aevum shareholders, providing a significant premium to the current market value of the shares and certainty of value through an all-cash offer,” Mr Quinn said.

“The retirement living industry is highly fragmented, and consolidation is beneficial for the long-term sustainability and prosperity of the sector.

“As Australia’s population ages, retirees will benefit from having well-capitalised organisations with strong property development and management capability, such as Stockland, driving customer research and delivering product innovation.

“Joining the two businesses, and utilising our position as Australia’s largest diversified property group, would provide greater diversity and scale to the benefit of Aevum’s stakeholders including employees and residents,” Mr Quinn said.

The proposal was put to the Aevum Board on 30 July 2010. Stockland looks forward to a constructive dialogue with the Aevum Board.

The transaction would be fully funded from Stockland’s ample cash reserves, and undrawn and available debt facilities. If Stockland acquires 100% of Aevum, proforma net gearing would increase 2% from a conservative 18% at 30 June 2010 to around 20%.

The acquisition would be EPS neutral in FY11 and approximately 2% accretive in FY12, and is expected to deliver a cash return on investment1 of around 8.5% by FY13.

Mr Quinn said the move was firmly in line with Stockland’s 3-R strategy to grow its Residential Communities, Retirement Living and Retail portfolios.

“Retirement Living is one of our key strategic growth platforms, leveraging our experience in residential development and appealing to Australia’s growing retirement-age population,” Mr Quinn said.

“While our Retirement Living development pipeline will deliver good organic growth, the acquisition of Aevum would almost double the size of our existing portfolio and provide us with a national Retirement Living platform.

“The transaction would provide us with geographic diversity, particularly in NSW, as well as greater scale and efficiency. It would also enhance our cash flow profile by delivering a more mature village portfolio,” Mr Quinn said.

Aevum has a total of 29 established retirement villages across Australia. This includes 17 in New South Wales, the largest for-profit market, and another 12 across Victoria, Queensland, South Australia and Western Australia. In addition, Aevum has a development pipeline of around 800 brownfield development units.

Aevum’s aged care business comprises just 5% of its net assets. Stockland would undertake a strategic review of the aged care operations to identify the most appropriate action, in line with its strategy to offer access to aged care services through specialist third-party providers rather than directly managed operations.

Stockland acquired an initial 14.4% stake in Aevum for $1.50 per share, or $26.9 million, in October 2008. Following Aevum’s merger with IOR Group in early 2010, this stake was diluted to 10.1%.

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About Stockland
Stockland is one of Australia's most diversified property groups and a top 50 company listed on the ASX and specialises in residential, apartment developments, commercial and industrial property.

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