Property group Stockland has ruled out sweetening its $2.4 billion takeover offer for rival Australand unless the Australand board opens its books for due diligence.
Stockland chief executive Mark Steinert is mounting a charm offensive to win over key Australand investors who he hopes will put pressure on the target's board to allow Stockland access to its financial records and details of its residential projects.
Australand on Wednesday morning rejected out of hand Stockland's indicative and non-binding all scrip bid, which was lodged on Tuesday afternoon.
If no deal can be reached, Stockland is prepared to walk away and sell its 19.9 per cent Australand stake and reap a potential $60 million profit.
Analysts have said the strike was the first in a new round of merger and takeover activity in the real estate investment trust sector.
Australand said the offer, which values Australand shares at $4.20 each, was too low, and rejected Stockland's request to enter into formal due diligence.
Australand's chairman, Paul Isherwood, said: ''Given the terms outlined in the proposal, the board has determined not to provide Stockland with access to due diligence material and remains focused on maximising securityholder value.''
It is the second time Australand has rejected a takeover offer. In December 2012, GPT launched an $2.8 billion indicative partial bid when Australand shares were close to $3.16, much lower than the current net tangible asset value of $3.56 a share.
Stockland bought its 19.9 per cent holding in Australand from Singapore's CapitaLand in March at $3.78 a share. At the time Stockland said the stake would allow the group to ''explore strategic opportunities with Australand''.
Stockland has offered 1.111 of its securities for every Australand security which, based on Stockland's closing price of $3.78 on Tuesday, implies an offer price of $4.20 per Australand stapled security.
Australand's share price dropped 1.17 per cent to close at $4.23 and Stockland closed marginally down at $3.76, after the offer was made.
Analysts at Goldman Sachs said: ''The ball is back in Stockland's court … so watch this space.''
Tony Sherlock, property analyst at Morningstar, said with Australand's NTA at $3.56, there was only a small amount of room for Stockland to up its offer.
But analysts at Moelis & Co said it would be more prudent for Stockland to remain on the sideline with the 19.9 per cent stake and wait for the Australand stock price to fall.
At the same time the company should talk to potential joint-venture partners and sell non-core assets so that it can offer a cash sweetener in any future bid for Australand.
In response, Stockland's Mark Steinert said it was ultimately in the hands of Australand investors as to whether he upped the bid or sold the stake and took the cash profit.
