centro finalises property groups merger

Its like pulling teeth gettingthis finalized but good to see the Hedge funds buying up scrip in CER at low to mid 30c range these boys will help protect our interest as they are in for a win one would think.

Cheers
Hotlegs

Centro finalises property groups merger Florence Chong From: The Australian July 27, 2011 12:00AM

CENTRO is expected to release a so-called implementation agreement outlining a proposal to merge Centro Property Group and Centro Retail Trust by early next week.
The plan is designed to salvage the remnants of the Centro empire, which at the peak of the market in 2007 managed about $27 billion worth of shopping centres in Australia and the US.

Centro chief executive Robert Tsenin has said previously he believes that amalgamation is in the best interests of Centro and its managed funds.

The Australian understands the agreement, which will be signed off by the parties involved this week, will set the "broad rules" for the process to a merger.

But details of the agreement have not yet been revealed.

A source described it as a "legalistic document" outlining the process and the broad parameters for the amalgamation.

"This will be a milestone for the trusts," said the source. "It will set out the management platform for the proposed Centro trust."

The source said the document was expected to be circulated in the market for a month. After that, an explanatory memorandum would be distributed to investors.

Unitholders will be required to vote on the proposal in late September. However, the process could be complicated by the competing interests of debt holders versus equity holders and hedge funds versus other stakeholders in the trusts.

New York-based hedge fund Marathon Asset Management yesterday lodged a substantial notice with the ASX, stating that it had increased its voting power to 6.4 per cent in CER.

It is now the largest unitholder in CER, after Centro-related interests.

Industry sources said yesterday that other hedge funds, such as York Capital, were thought to have bought into CER.

The hedge funds own the debt in CNP. When the debt is swapped for equity, they could emerge owning up to 70 per cent of the new vehicle.

In a recent note, JPMorgan calculated that Centro security holders' stake in the merged vehicle -- after its stake in CER was accounted for -- would be about three-quarters of the register of the combined entity.

Centro owns or manages 103 shopping centres in Australia, which at December 31 were valued at $7.2bn.

The sale of its US shopping centres to the real estate arm of the giant private equity group, Blackstone, for $US9.4bn ($8.6bn), was settled on June 30.

JPMorgan's head of research, Rob Stanton, wrote recently that a Centro Mark II would have a market value of about $3bn and produce a net operating income of $200m-$210m a year.

He estimated that such a merged vehicle would have gross assets of $4.6bn and debt of $1.6bn, with a gearing level of 38 per cent.