Proposal leaves Valad in limbo Carolyn Cummins December 17, 2010
VALAD Property Group faces being split up and sold off after an indicative and incomplete management buyout proposal for its European business.
No price was named and investors remain in the dark about what it could mean for the Australian and New Zealand businesses.
The bid consortium includes Valad managing director Peter Hurley and its European chief executive, Martyn McCarthy.
Advertisement: Story continues below As part of the protocols, Mr Hurley is to take leave due to his conflicts of interest. But it is unlikely he will be asked to leave if the buyout fails, because if Mr Hurley's employment is terminated without cause before June 30, 2011, he is entitled to $2.28 million.
Simon Wheatley, executive director for Goldman Sachs's real estate investment research said a failure of the management buyout would result in the chief executive's departure. ''Either way, there are obvious associated uncertainties relating to Valad's ongoing management,'' he said.
The management buyout plan raised the ire of other investors, with former managing director and Valad founder Barry Wynne saying that though ''the deal is not illegal, it's certainly not very moral''.
The business the directors wish to buy is Valad Europe, a funds management business with $7.3 billion as of June 30. It includes a 50 per cent interest in the Duke joint venture with Lloyds, which has about ?? billion but gearing of about 110 per cent so it now has no equity value.
In June, Valad carried its European business at $76.2 million, the bulk ($65.1 million) relates to intangibles.
JP Morgan's property team says one condition of the establishment of Valad's British Duke joint venture with Lloyds Banking Group in July 2009 was that if the European business was sold before June 2012, the proceeds would be used to reduce Duke's debt.
''It appears the proposed management buyout has agreed terms with Lloyds for any proceeds offered for the business to be received by Valad,'' JP Morgan's research analysts said. ''It could be viewed as disappointing to see senior management trying to benefit from realising the value inherent in Valad.
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