goodman soars over stake sale talk

Carolyn Cummins
June 5, 2009 - 1:46PM

Goodman Group investors are hoping the imminent release of details for the recapitalisation scheme will keep the shares in their current buoyant phase as the price hurtled up another 4 per cent this morning to 35 cents.

Speculation also centred on whether the group was readying for a capital raising to keep up with its peers, such as Mirvac, which dipped back into the market yesterday for another $1.1 billion.

In the past week Goodman has jumped from 25 cents on very high volumes. So far today, 82 million securities have changed hands, which is just above the daily average.

But yesterday more than 182 million were traded, which was about the same as last Friday, which has the market suggesting a deal is not far away.

BusinessDay understands news may come out as early as next week, following the Queen's Birthday holiday. This will see a significant reshuffle of the group's share registry, although it is tipped to be a
friendly deal, rather than an hostile takeover.

Goodman Group said today it does not comment on market speculation.

The ASX sent Goodman a query on the price jump and brokers said there remains significant uncertainty about the stock. That has led to much speculation about the future of Goodman.

Two weeks ago Goodman said it was rekindling its relationship with Macquarie Bank through an options deal, which is likely to see the bank emerge as a substantial shareholder, for the second time in Goodman's listed history.

But, at the time of the deal being announced, the founder, Greg Goodman, said there were other strategic partners involved in a separate refinancing deal.

One of those partners, as suggested recently by BusinessDay, are the Chinese Investment Corp, with the other is said to be a Canadian-based pension fund.

Goodman already has strong ties in Asia through its Hong Kong and Singapore-based operations and is keen to expand into the region, which Mr Goodman feels will be the growth engine for property in
the coming years.

But brokers remain mixed in their outlook for the group.

Goldman Sachs JBWwere's Peter Zuk wrote, in a note to clients, that he would argue Goodman is better positioned than some other REITS which have rallied much harder off the bottom. Triggers for a lifting of the fear factor will be; a lesser level of replicated loan and option packages than the market expects.

"We have been thinking triple the current Macquarie option to fully take out the syndicated loan tranche. We get the sense management may be looking to on-sell the Macquarie deal to others which would take out Macquarie and reduce the overall options issued,'' Mr Zuk said.

"We question whether Goodman need to seek much more in the way of loans and options packages at this point anyway but we expect it will finalise this process by June 30.

"Successful asset sales at close to book values and at yields in the high 7 per cent to low 8 per cent range.

"We suspect some evidence along these lines is very close to being delivered in both UK and Australia. Sales evidence is important in giving comfort that loan to value ratio covenants in unlisted funds will not breached.''

Citi's analysts said they rate Goodman a Hold/Speculative to reflect potential for further refinancing by debt/equity mix; dilution when the options to Macquarie are exercised, and management comments
that it would look to do similar deals, as the Macquarie deal, with other parties.