Lend Lease meets GPT’s conditions
Adam Parsons

Lend Lease has finally agreed to terms set by General Property Trust’s independent directors.

Under the new deal announced late Friday the independent GPT directors will now recommend the merger to its shareholders.

Lend Lease shares and GPT units will be stapled to form the Lend Lease Group.

Will deal is based on the agreed ratio of one existing Lend Lease share to every 3.8 GPT units, plus 65 cents cash special distribution per existing GPT unit.

Lend Lease shareholders will also receive a fully franked special dividend totalling $95 million (estimated 26 cents per share, post completion of the Lend Lease buyback).

According to Lend Lease, in addition, an interim dividend and distribution based on 100% of net profit for the period from 1 July 2004 to the date of merger implementation will be paid to both Lend Lease shareholders and GPT unitholders, if the merger is approved. These dividends and distributions are also in addition to dividends and distributions payable to Lend Lease shareholders and GPT unitholders for the period to 30 June 2004.

Based on an illustrative distribution yield of 7.3% for the stapled securities, Lend Lease’s agreed proposal values current GPT units at $3.58 and current Lend Lease shares at $11.40. The interim distributions and dividends to be paid at the time of the merger are additional to these amounts and are currently expected to be around 8 cents per GPT unit and around 22 cents per Lend Lease share(1).

GPT’s register has over 50,000 small investors. Arrangements have been put in place to allow the small investors to cash out their units at a fixed price of $3.48. The cash-out facility is subject to the aggregate amount of cash not exceeding $1.31 billion.

Lend Lease will pay to GPT an amount equal to the performance fee for the half year ended 30 June 2004, provided the merger is completed. Lend Lease will continue the suspension of the on-market share buyback beyond the announcement of results on 18 August 2004. As previously advised, Lend Lease intends to offer an off-market buyback for the remainder of the previously announced share buyback program, of which $388 million remains to be fulfilled.

Both Boards will move to put the recommended proposal to their investors simultaneously and as soon as possible.

Lend Lease chairman, David Crawford, and GPT Chairman of Independent Directors, Peter Joseph, said they were both delighted to have an agreed proposal to put to the respective investors.

They said under the agreed proposal, the merged Lend Lease Group has an attractive outlook and improved long term earnings prospects.

Crawford said that the rationale for the merger from a Lend Lease shareholder’s perspective is the strategic platform it creates. We believe the merger will provide significantly enhanced growth opportunities, with underlying earnings stability and improved access to capital.

“The merger is expected to create significant value for Lend Lease’s shareholders by establishing the economic scale necessary to secure its growth strategy in retail and urban communities development in Australia, the UK and the US,” Crawford said.

“We have worked together to reach agreement on a number of issues of fundamental importance to both parties.

“We have agreed principles for important non-financial matters regarding governance, culture and management, including Board structure, as well as filling senior executive roles and the operating structure of the merged organisation,” Crawford concluded.

It is intended that this be augmented over time by new, suitably qualified appointees.
David Crawford will be chairman and Greg Clarke will be managing director and CEO of the merged Lend Lease Group.

Lend Lease and GPT will conduct a joint market presentation on the agreed management and operating structure for the merged entity this week.

Lend Lease managing director and chief executive, Greg Clarke said that the merger proposal had reached this important milestone.

“The inter-Board negotiations have delivered a merger proposal that we believe will deliver significant strategic and financial advantages to each business,” Clarke said.