iam voting no to the merger

Further to the points I raised in my previous post, there are a few more I?d like to add:


The ann suggests that the new entity will generate a 6% return on equity.


"A sustainable earnings profile with a first year earnings yield (on net assets including
intangibles at inception) expected to be around 6%; (Page 3)"


If CER does not proceed with the amalgamation, my estimates are that CER would earn up to $68M on NTA of 41c ($943m equity) or 7.2% return on equity, which is higher than what the proposed plan.

Also NOI on our portfolio should increase by another few % in the second half of this year, which would mean an additional $2M net profit ($120M NOI x 2%), taking return on equity to 7.4% assuming NTA is still 41c.

All my workings are in the below link, which I posted on here back in March.


http://hotcopper.com.au/post_single.asp?fid=1&tid=1402279&msgid=7932671

When the HY report is released at the end of August, I will evaluate the balance sheet and be in a better position to calculate the profitability of CER as a stand alone entity.

Point 2: The gearing of the new entity is expected to be 40%:

?A sustainable level of gearing and debt maturity profile. We expect the LVR to be
approximately 40% (calculated as secured debt to directly owned property assets).
Discussions are well progressed with new and existing financiers for the A-REIT
financing;?

How does this differ from our current position of 40% post the US sale??


Point 3:
?CNP will vend its Services Business to A-REIT for approximately $200 million,
representing the goodwill attributable to that business for both the internalisation of
funds and property management functions as well as the external funds and property
management of the Syndicate business. The businesses contributed will include the
relevant contracts, employees, and other relevant asset and liabilities (receivables,
employee entitlement provisions etc). CNP is also vending in non recurring receivables
relating to accrued rollover, performance, wind-up and deferred responsible entity fees
related to the Syndicate business totalling approximately $40 million (in addition to the
$200 million described above). There are appropriate provisions in place such as
conditions precedent and in some instances price adjustment mechanics in the event
that the management of some Syndicates is not delivered to the A-REIT.?

I think in my recent post, I said the cost to CER would be $58M ($200M x 29% CER equity stake)
I actually didn?t notice the other $40M, which makes the total cost to CER $69M or 3c NTA

Yes in a way, it would be good to have the management business internalised as it would result in a higher return for CER shareholders, however my issues are:

- Most of CNP?s value in the services business is in relation to the syndicates it looks after.
- We are paying up to $69M to have the management business internalised and still being penalised with a 6% return on equity. A double whammy for CER


I am now further of the opinion that this deal is a crock for CER holders and the market accordingly has spoken.

I am just afraid that the CNP debt holders have taken up strategic positions in CER to ensure the deal gets voted through. Really all debt holders of CNP should be exempt from voting regardless of which Centro entity they have a stake in.

I am voting NO.

As I reiterate, the best way to maximise value for CER holders is to market the portfolio for sale as we did for the US assets.

Opinions please?