DNZ still favours Argosy merger
Aug 10 (BusinessDesk) – DNZ Property Fund Ltd. will continue to pursue a merger with the Argosy Property Trust for as long as the synergies it can see remain available, DNZ chairman Tim Storey told shareholders at the property manager’s annual meeting today.
His comments come a day after an independent report by merchant bankers Grant Samuel approved as “fair” the revised $20 million offer by ANZ-owned OnePath Ltd. to sell back the management contract for Argosy’s properties to the fund’s unitholders.
OnePath had previously proposed a $32 million price tag for allowing a management internalisation to occur, prompting institutional shareholder resistance. However, the revised offer appears more likely to succeed, especially as Argosy’s trustee, Guardian Trust, supports the latest offer as in unitholders’ best interests.
“While presently we are in a unique position where the proposal appears of benefit to DNZ shareholders, this position may not continue, particularly if this merger cannot be considered ahead of the proposed Argosy internalisation, as material benefits will be lost forever,” said Storey.
The board was also conscious of the costs and management distractions created by pursuing the Argosy play, this opportunity, although the costs were “not expected to affect indicated distributable earnings for the financial year.”
If successful, a DNZ/Argosy merger would create the largest internally managed listed property company on the NZX.
The DNZ board will monitor the situation in the lead-up to the Argosy AGM, a date for which has yet to be set, Storey said.
The board also agreed this morning to a first quarter dividend of 2 cents per share, in line with its broader review of dividend policy following a favourable binding ruling from the Inland Revenue Department regarding the tax treatment of DNZ’s own recent management internalisation process.
The policy change will see between 75% and 85% of the company’s profits distributed as dividends, with an expectation that dividends will total a minimum of 8 cents per share for the year to March 2012, “subject to economic conditions and trading performance.”
The first quarter dividend will carry no imputation credits, has a record date of Aug. 25, and will be paid on Sept. 8.
Storey dismissed recent global financial markets turmoil as a reason to change DNZ’s current view that “the New Zealand property market is around the bottom of its cycle and we should look - albeit cautiously - to take advantage of the opportunities that are available to a well capitalised and well-managed company.”
“This will mean a continuation of our policy of looking to acquire better quality assets and disposing of assets which have reached their maximum value. Development opportunities and well-priced acquisitions were also on the agenda, “if circumstances are appropriate.”
A presentation for the AGM says commercial office space remains the most challenging part of the sector, while bulk Do It Yourself space, such as DNZ’s leases to Bunning’s and Mitre 10 outlets, and industrial occupancy were the most robust.
Its two Christchurch properties were relatively unscathed in the string of earthquakes that has hit the city since last September.
Rent reviews at DNZ’s Foodstuffs supermarkets meant the 4.3 year weighted average lease term at March 30 would rise to 5.7 years across the company’s whole portfolio.
The shares were unchanged at $1.20 in trading today, and have gained 1.7% this year.