Business Spectator 1:37 PM, 24 Nov 2008 GILES PARKINSON Cut-price communities
Lend Lease and its deal partner Babcock & Brown Communities appear to have taken advantage of the perilous position of the Babcock & Brown mothership and have halved the proposed payment for B&B’s stake in the aged care specialist.
The two companies today announced revised terms of their two-month-old agreement, which followed a due diligence process, and talks with bankers and the two partners in the deal, along with their advisors Gresham Partners and ABN Amro.
Lend Lease has cut the price to be paid to B&B for its 12.5 per cent stake in B&B Communities to 29c a share from 58c, cutting the payment from $49 million to $25 million.
Although the parent company is clearly in need of cash to meet the demands of its bankers, it appears to have been able to do little to stand in the way of the cut, particularly with B&B Communities securities also slumping in recent weeks to around 11c.
Instead, Lend Lease will inject an extra $25 million into B&B Communities by way of convertible notes, buying 100 million of the securities at 25c each. This means its overall cash outlay remains the same.
Lend Lease has, however, also negotiated down the purchase price of the new stapled securities in B&B Communities it will buy, to 60c from 68c, meaning it will gain extra shares from the $170 million invested. Overall, it will end up with 43.2 per cent of B&B Communities, as opposed to just over 41 per cent under the original plan.
B&B will also sell the management rights to B&B Communities for $17.5 million, with $5 million to be paid immediately on transfer of the rights, and the remainder after shareholder approval and certain conditions are met.
B&B Communities is the first of B&B’s array of listed specialist funds to cut itself adrift from the mothership, although others are in the process of following, having either negotiated the sale of management rights, or a reduction and cap on the fees payable.
Several funds, including B&B Wind Partners, have retained advisors such as UBS, to actively canvass proposals for a complete separation from the parent company.
In the case of B&B Communities, financial advice is coming from an ABN Amro team led by Daniel Janes and Morgan Hill, while Lend Lease is using a Gresham Partners team including Bruce McLennan and Hugo Dudley-Smith.
Prime Trust, which has also made a proportional takeover offer for B&B Communities, is using the resources of Kidder Williams, which is associated with Prime Trust MD Philip Powell.
BBC Price at posting:
12.5¢ Sentiment: None Disclosure: Held
