Cromwell flags merger of syndicates
| By Stephen Naylor Oct 23, 2006 |
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Cromwell Corporation Limited today announced proposals to create a new $1 billion stapled property group known simply as the Cromwell Group. The proposals involve merging the flagship Cromwell Diversified Property Trust with five other Cromwell managed syndicates and stapling the property trust to the management arm.
Cromwell Chairman Paul Weightman said the new Cromwell Group would be an internally managed major Australian property owner with operations in Queensland, New South Wales, Victoria, South Australia, Western Australia, Tasmania and the Australian Capital Territory.
The Cromwell Group is expected to have a market capitalisation of between $720 million and $780 million, with property assets throughout Australia in excess of $1 billion.
“This is a very exciting and important milestone for Cromwell shareholders and fund investors, effectively aligning the interests of all stakeholders,” Mr Weightman said.
Mr 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; greater certainty of earnings for shareholders with more predictable and higher distributions; an investment in an open ended vehicle for trust and syndicate investors, rather than the current fixed term structure; inclusion in major ASX indices and exposure to institutional investors; improved net tangible asset backing and diversification of risk; and 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.
PricewaterhouseCoopers has valued the stapled securities between $1.04 and $1.12 each, an effective distribution yield of 8.0% to 8.7% per annum, and believes the proposals are in shareholders’ best interests.
The proposals have the unanimous support of the directors of Cromwell and Cromwell Property Securities Limited, the responsible entity of the trust and the syndicates.
If approved, Implementation of the proposals is expected to be completed in December 2006. The new stapled securities will trade under Cromwell’s existing code, CMW, which is also subject to ASX approval.
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