cer holders must reject the merger, page-9

Just a few clarifications from my last post:

What I should have clarified is when CNP were marketing its US portfolio for sale, CER said it would also invite expressions of interests providing the offer was in the best interest for shareholders

This was a $9b sale of assets mind you.

The Aust portfolio is approx. half of this yet Centro has not explored this option. I am assuming that the CNP debt holders dont want to realise too much of a shortfall ($1.6B or whatever the figure is, even though they purchased the debt at <50c in the dollar). At least by amalgamating, CNP debt holders can claw back some of their losses by charging CER an excessive amount of mgmt fees to become part of the group. Once again CER is a cash cow vehicle for CNP. This is what happens when the CEO of CER is the “group CEO” of Centro.

Also, lawyers/consultants/advisers/independent experts cant really make any money if a simple idea such as offloading the entire portfolio is enacted. As weve all read lately, the amount of fees paid out by Centro is enough to cover the GDP of a small African country.

Luckily though, these should all be viewed as “sunk costs”. Yes it’s a disgrace what has been spent but whatever we have incurred already should not make any difference to future decisions.

We shouldn’t fear such actions like CNP debt holders removing the board of CER if the amalgamation doesn’t go ahead (as they collectively have a 50% interest in CER), installing themselves in and dealing unethically with CER’s assets (such as selling them to CNP for no or low consideration, which benefits them)

We are protected by sections 180-184 of the Corporations Act, which would not allow any dealings of such nature. Have a read of these sections if you need comfort.

As I stated, even if we are paying the receiver of CNP, management fees, this changes nothing to CER. The receiver will continue trading on CNP as per normal! The receiver will need to sell the assets of CNP and the management rights would be one of the things the receiver would need to deal with. CER can bid for them at a much lower valuation, dismissing all the syndicate charges that are included in the current amalgamation .

A sale of Centro Galleria not only would reduce CER’s gearing to 30% but it would actually improve CER’s net profit as the cost of debt we are currently paying is around 9% vs the current cap rate of about 6%. This alone would increase net profit by about $9M assuming sale price of $300, (CER’s share).

Getting an opinion of an independent expert really is quite meaningless. When CER merged with CSF in late 2007, an independent expert gave the merger the thumbs up. There was a promise of distributions increasing year after year etc. A few months later, profits from CSF were quarantined from distribution to CER. It was in May 2009, that distributions from CSF to CER were reinstated after substantial asset sales within that portfolio.

Anyway, Im sticking to my 72 font NO.

Cheers