china takeover, page-28

This Article in the Australian kind of supports what you're saying. It depends what price?

Florence Chong | June 18, 2009
Article from: The Australian
The continued slide in Goodman Group's share price has increased the risk that China Investment Corporation will take over the whole vehicle, according to industry analysts.

In his note on the CIC deal, JPMorgan real estate investment trust analyst Richard Jones said CIC, China's sovereign wealth fund, had done extensive due diligence on the group.

The risk for Goodman was that the share price was outside its control while it tried to make progress on recapitalisation, said Mr Jones.

"However, if it gets too cheap, there is a possibility CIC may take the whole vehicle out," he wrote.

Goodman's shares closed at 49c on Monday, but started to fall after the deal was announced on Tuesday. The stock closed at 38c yesterday, down 11c, or more than 20 per cent, in two days.

Mr Jones said he expected Goodman's share price to slip to the 30c level.

Goodman signed up CIC for a $200million short-term debt facility in return for 276 million options, which when converted into equity would represent a stake of about 8 per cent.

The industrial property trust last month wrote a similar deal with the Macquarie Group for a bridging loan of $285m in return for 293 million options.

Citigroup analyst Peter Cashmore said in a note that, by taking a secured debt position, CIC had secured a good inside look at the Goodman business.

Mr Cashmore said the option to work with CIC as a partner in its operations was the end-game for Goodman.

The two deals would give Goodman $485m to pay out debts maturing this year.

Together, the two strategic investors were issued 669 million options at a strike price of 30c in the case of Macquarie and 40c in the case of CIC. The final conversion price would be based on the average of the two prices.

JPMorgan said a one-for-one rights issue, at least partially underwritten by CIC, as well as a placement of up to 15percent to CIC, was likely.

Citigroup said a capital raising was expected to be completed after some progress had been made in its managed funds.

Goldman Sachs JBWere analysts said Goodman would need to raise an estimated $1.25bn to fully recapitalise its balance sheet.