Augusta announces Bid Implementation Agreement
/ Augusta News
Augusta announces Bid Implementation Agreement at $2.00 per share
Shareholders are advised to take no action at this stage
• Augusta Capital Limited (Augusta, NZX: AUG) has entered into an agreement under which Centuria Capital Group (Centuria, ASX:CNI), subject to obtaining certain regulatory approvals, will make a takeover offer for 100% of Augusta shares (Offer).
• Centuria is an ASX-listed specialist property investment management company with A$7.3 billion of assets under management.
• The price of the Offer will be NZ$2.00 per Augusta share. Shareholders who accept the Offer will be able to elect to take either cash or Centuria scrip in consideration for their Augusta shares. Shareholders may also decide to not accept the Offer.
• The Offer will value Augusta’s issued equity at NZ$180 million (1) with an enterprise value of NZ$204 million (2). The Offer price represents an attractive premium to recent trading.
• The Independent Directors of Augusta have agreed to unanimously recommend the Offer subject both to the Offer price being in (or above) the range of an Independent Advisers Report (IAR) and to no superior proposal emerging.
• Executive Directors Mark Francis and Bryce Barnett, who collectively own 23.3% of shares in Augusta, have undertaken to accept the Offer and accept Centuria scrip. They have also entered into three-year employment agreements with Augusta. Centuria has informed Augusta that other shareholders of Augusta, accounting for 12.9% of Augusta ownership, have also undertaken to accept the Offer.
• The Independent Directors of Augusta believe that the announcement today and the expected Offer will not adversely affect the funds managed by Augusta or the proposed issuance of securities in the Augusta Property and Tourism funds being initiated by Augusta.
• The Independent Directors of Augusta advise shareholders to take no action at this stage and to wait for the issuance of the Target Company Statement (which is expected to be released within the next 10 weeks).
Augusta has today announced that it has entered into a Bid Implementation Agreement (BIA) with Centuria under which, subject to certain approvals being received from regulatory authorities, Centuria will make an Offer for 100% of Augusta’s shares in accordance with the New Zealand Takeovers Code.
If the Offer proceeds, the price of the Offer will be NZ$2.00 per share. All Augusta shareholders will have the option to take cash or receive Centuria scrip to an equivalent value based on the volume-weighted average price (VWAP) of Centuria’s shares in the 5 trading days prior to this announcement, being A$2.40 per share leading to a scrip ratio of 0.807 Centuria shares per Augusta share (3).
Shareholders may decide to not accept the Offer. However, if 90% of shareholders decide to accept the Offer, Centuria may exercise its right under the Takeovers Code to acquire all remaining shares in Augusta.
A copy of the BIA is attached to this announcement.
Independent Directors Committee Recommendation
An Independent Directors Committee, consisting of Paul Duffy (chair), Jonathan Ross, Fiona Oliver, Mark Petersen and Kevin Murphy, was formed by the Board of Augusta to deal with all aspects of the process leading to the BIA and the expected Offer from Centuria.
If the Offer is made in accordance with the terms set out in the BIA, the Independent Directors Committee has agreed to unanimously recommend the Offer to Augusta shareholders subject to the Offer price being in (or above) the range of the IAR and no superior offer emerging.
The Independent Directors Committee believes the Offer price values the current Augusta business plan in its entirety and is a strong offer for Augusta shareholders for the following reasons:
• Valuation: The price of $2.00 per share represents:
o A 20% premium to Augusta’s closing share price on 28 January 2020;
o A 28% premium to Augusta’s 30-day VWAP prior to this announcement;
o A 34% premium to Augusta’s 60-day VWAP prior to this announcement; and
o An attractive acquisition multiple. The enterprise value implied by the Offer is 17.9 times FY19 EBIT and the Offer values Augusta equity at 25.9 times FY19 NPAT (Augusta previously announced on 27 November 2019 that FY20 outcomes are likely to be materially similar to the FY19 outcomes).
• Optionality: Centuria’s Offer consideration provides Augusta shareholders with an option to have further exposure to the Australasian property management industry by becoming shareholders in Centuria, an experienced specialist property investment manager with a 35-year track record.
o Please see information related to Centuria and its recent transactions further below.
• Certainty of value: The option of 100% cash consideration provides Augusta shareholders with certainty of value and the opportunity to realise their investment in Augusta in full for cash.
• Presents a good opportunity for long-term shareholders: The Offer price captures the benefits of Augusta’s strategy and recent performance improvement.
The Independent Directors Committee makes no recommendation as to whether shareholders should take scrip. However, the offer of Centuria scrip gives investors access to:
• Greater scale, diversity and financial capacity: Centuria is a substantially larger and more diversified Australian property investment manager with the financial capability to underwrite new investment offerings. If the transaction is completed, Centuria will provide Augusta shareholders who accept scrip with an improved ability to execute opportunities in New Zealand and an exposure to the wider Australasian property management industry.
• Enhanced continuity and leadership for investors in Augusta funds: Executive Directors, Mark Francis and Bryce Barnett, who collectively own 23.3% of shares in Augusta, have undertaken to accept the Offer and accept Centuria scrip. They have also entered into three-year employment agreements which provides continuity of leadership for the benefit of Augusta staff and fund investors.
A full assessment of the Offer and the scrip proposal will be set out in the Target Company Statement which will include the IAR.
Augusta Independent Chairman, Paul Duffy, said: “The Board’s Independent Directors are satisfied that Centuria’s offer for Augusta represents an attractive opportunity for Augusta shareholders to either realise full value for their Augusta investment or to remain invested through Centuria’s scrip offer and become part of a substantially larger, diversified Australasian property investment manager.
“Importantly, there is an alignment on strategy and values between our two organisations. If the transaction successfully completes, I believe Centuria will bring added capability to support the launch of new investment offerings over the coming years, which our longstanding investors would continue to benefit from.”
The Offer will be conditional on receipt of Overseas Investment Office approval and is subject to Centuria receiving 90% shareholder approval. At Centuria’s discretion, this latter condition can be waived if acceptances over 50% are received. Because Centuria requires certain regulatory approvals before it can make the Offer, the Notice of Offer (Notice) is expected to be made within six to eight weeks from the date of this announcement.
Mark Francis, Founder and Managing Director, and Bryce Barnett, non-independent Executive Director, who collectively own 23.3% of shares in Augusta have undertaken to accept the Offer and accept Centuria scrip (to which escrow arrangements have been agreed). Both parties have also agreed new employment arrangements with Augusta on substantially the same terms as their current arrangements which will become effective from the transaction completing.
In addition, Centuria has informed Augusta it has secured agreements from other investors amounting to 12.9% of Augusta shares to accept the Offer.
The Offer will be funded by Centuria via its existing debt arrangements, an equity placement being completed today and through the potential issuance of scrip as consideration in the Offer. Neither the issuance of the Notice nor the Offer itself is conditional on finance.
The Independent Directors Committee advises Augusta shareholders to take no action at this stage and wait for the issuance of the Target Company Statement which will be released shortly after the Offer is received. The Target Company Statement will set out a full assessment of the merits of the Offer and include the IAR.
Background to the Offer and the role to date of the Independent Directors Committee
Centuria approached Augusta with an indicative proposal in October 2019. Having received commercial and legal advice, the Independent Directors Committee worked with Centuria with a view to ensuring that the Offer price of the indicative proposal reflected the full value of Augusta. Once this was achieved, limited due diligence was undertaken. In January 2020, Centuria confirmed its offer and the BIA was entered into.
The Independent Directors Committee is being advised by Cameron Partners and Chapman Tripp.
Key milestones and indicative timing for Offer process
The expected process and an indicative timetable from here is as follows:
Action Indicative timings
Centuria seeks required waivers 6-8 - weeks from now
Notice of Offer lodged by Centuria - 6-8 weeks from now
Offer document dispatched by Centuria - Within 2 weeks of Notice of Offer
Target Company Statement and IAR dispatched by the Independent Directors Committee - Within 2-4 weeks of Notice of Offer
Minimum period Offer must remain open - 20 working days from Offer Document being dispatched
Maximum period Offer must remain open - 90 working days from Offer Document being dispatched
The Independent Directors Committee will update shareholders on the process as it develops. The Independent Directors Committee recommends that shareholders take no action at this stage and wait for the issuance of the Target Company Statement which will be released either simultaneously with, or shortly after, the formal Offer document is dispatched by Centuria. The Target Company Statement will set out a full assessment of the merits of the Offer and include the IAR. It will also set out the process to follow if shareholders wish to accept or not accept the Offer. Shareholders are encouraged to seek their own independent, professional investment advice in relation to the Offer.
Business operations of Augusta
The Independent Directors Committee of Augusta has confirmed that the announcement today and the Offer does not adversely affect the funds managed by Augusta, including:
• Asset Plus which owns a nationwide diversified portfolio of properties spread across the main centres of Auckland, Wellington and Christchurch, with select provincial exposure; and
• Augusta Industrial Fund which owns a portfolio of strategically selected assets providing both tenant and location diversification within the industrial property sector.
The Board of Directors of both funds have been notified of the BIA and will issue their own statements to the investors in these funds.
Furthermore, the Independent Directors Committee has confirmed there will be no impact on the proposed issuance of securities in the Augusta Property and Tourism funds currently contemplated by Augusta. Further detail in relation to both funds, including timings will be provided to the market in the first half of February.
The Augusta quarterly interim dividend for the period to 31 December 2019 is expected to be paid in February. The dividend payment remains subject to the usual Augusta Board approval process and will have no impact on the $2.00 per share Offer price.
Further information for Augusta shareholders
As the takeover process progresses, the Independent Directors Committee will keep shareholders updated on any significant developments. To assist with communications to shareholders, the Independent Directors Committee has established a page on the Augusta website www.augusta.co.nz/takeover where all NZX announcements and media releases related to the Offer will be made available. Shareholders are encouraged to email the Independent Directors Committee at firstname.lastname@example.org if they have any queries about the Offer.
All media enquiries should be directed to:
+64 275 111 561
About Augusta Capital (NZX: AUG)
Listed on the NZX, Augusta actively manages approximately NZ$2 billion of assets – involving office, retail and industrial properties throughout New Zealand and Australia. Founded by Mark Francis in 2001 – Augusta’s evolution reflects a proven skill and experience in identifying value and moving decisively to turn-around under-performing assets.
Augusta has evolved from its origins as a single asset property syndicator – today Augusta is one of New Zealand’s largest and leading property funds management specialists. Augusta's growth strategy is underpinned by an active management approach – where the scale and diversity of the offerings continue to expand as it grows its funds under management.
About Centuria Capital Group (ASX: CNI)
Centuria Capital Group (Centuria) is included in the S&P/ASX300 Index and enjoys a market capitalisation in excess of A$1billion. As an established fund manager overseeing $7.3 billion of assets under management, Centuria focuses on a clear and simple strategy of aiming to deliver income and capital growth from compelling real estate and investment bond sectors for a broad range of investor profiles.
Centuria formed in 2007 when the Over Fifty Group joined with Century Funds Management, which was founded by John McBain and Jason Huljich. John and Jason are the Joint CEOs of Centuria and have extensive experience in overseeing real estate funds management, investment management, M&A and investor relations.
Centuria’s funds management platform includes Centuria Real Estate Funds (specialising in listed and unlisted real estate funds) and Investment Bonds. Over the course of the Group’s history, Centuria has focussed on utilising in house real estate expertise to identify, transact and manage investment funds in these sectors.
Listed Real Estate Funds
Centuria Metropolitan REIT (ASX: CMA): CMA is Australia’s largest ASX listed pure play office REIT and is included in the S&P/ASX300 Index. CMA owns a high-quality office portfolio valued at $2.1 billion with assets located throughout Australia. Centuria is a hands-on, active manager and the fund provides investors with income and the opportunity for capital growth.
Centuria Industrial REIT (ASX: CIP): CIP is Australia’s largest domestic pure play industrial REIT and is included in the S&P/ASX 300 Index. CIP owns a $1.6 billion portfolio of high-quality industrial assets throughout Australia. CIP is underpinned by a quality and diverse tenant base, and it too provides the opportunity for income and capital growth from its portfolio of industrial assets.
Unlisted Real Estate Funds
Centuria Unlisted Funds: Centuria currently manages $2.0 billion of assets across a range of closed-ended funds and the open-ended Centuria Diversified Property Fund (CDPF) on behalf of an extensive range of retail, high net worth and wholesale investors. As one of the longest standing divisions within Centuria’s organisation, Centuria has developed a long track record of identifying, establishing and overseeing unlisted fund opportunities on behalf of a broad range of investor profiles.
Centuria Heathley: Formed in 1977, Heathley Limited has established and managed over 50 investment funds for its investors. In 2019, Centuria acquired a 63.06% economic interest in Heathley Limited, forming Centuria Heathley. Centuria Heathley is a specialist healthcare real estate funds manager focused on cost effective models across the healthcare chain. Centuria Heathley leverages its depth of knowledge, relationships and skill set in the health and aged care property sector to drive attractive, consistent and reliable income and the potential for enhanced capital growth for its investors.
Centuria Investment Bonds: Centuria currently manage $0.9 billion of investment bonds that give investors with medium-to long-term goals the capacity to make tax-effective investments outside superannuation. Centuria has two investment bond products including Centuria LifeGoals providing opportunities to invest in 22 high quality externally managed funds and Centuria Investment Bonds, a selection of Centuria managed funds.
More information regarding Centuria Capital Group is available from www.centuria.com.au
(1) Equity value and percentage shareholdings presented are based on total Augusta shares of 90.01 million, which includes 2.18 million of performance rights which will vest as part of the transaction
(2) Based on Augusta’s net debt position of NZ$24 million as at 31 December 2019
(3) The AUD/NZD exchange rate as at 28 January 2020 that was used to set the scrip ratio was 1.0331