IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Event-Driven

<a href="https://www.smartkarma.com/entities/irongate-group" target="_blank" data-smartkarma-citation="entities:30897:1" rel="noopener">Irongate Group (IAP AU)</a>, previously called the Investec Australia Property Fund, is a property trust dual-listed on the ASX and JSE. IAP disclosed an unsolicited and indicative non-binding proposal from <a href="https://www.smartkarma.com/entities/360-capital-group-ltd" target="_blank" data-smartkarma-citation="entities:11865:1" rel="noopener">360 Capital (TGP AU)</a> and <a href="https://www.smartkarma.com/entities/360-capital-reit" target="_blank" data-smartkarma-citation="entities:29046:1" rel="noopener">360 Capital REIT (TOT AU)</a> at an indicative headline price of A$1.65 cash per security. The offer price will be reduced by any distributions declared or paid from the date of the proposal. As IAP anticipates a 1HFY22 dividend of A$0.0453 per security, the indicative offer less the 1HFY22 distribution is A$1.6047 per security, a 7.0% premium to the unaffected price of A$1.50 (on 15 October). 360 Capital is IAP largest shareholder and represents 129.0 million IAP securities or 19.99% of IAP securities. The holding is through 360 Capital REIT and 360 Capital Group. 360 Capital built its stake from January 2021 at an average entry price of A$1.41 per security. 360 Capital is seeking a six-week exclusive due diligence period. IAP responded by noting the offer was highly conditional and uncertain particularly regarding financing. The indicative proposal is conditional on ESR Australia entering into an agreement with 360 Capital to buy several undisclosed assets from IAP’s portfolio, on terms yet to be agreed. The proposal also requires entry into new debt facilities with Citibank.  360 Capital relationship with IAP is verging on the hostile. In August, shareholders voted against the election to the board of two 360 Capital candidates after IAP’s Chairman cautioned that 360 Capital could seek to gain effective control of IAP below its fundamental value, through the board. The situation is also reminiscent of 360 Capital Group failed takeover attempt for <a href="https://www.smartkarma.com/entities/e-p-financial-group-ltd" target="_blank" data-smartkarma-citation="entities:27077:1" rel="noopener">E&amp;P Financial Group Ltd (EP1 AU)</a>. <div class="content-highlight">We think that indicative offer is modest in comparison to historical multiples and share prices. Given 360 Capital strained relationship with the IAP board, it is likely that 360 Capital could go hostile by launching an off-market takeover offer. At the last close price, IAP is trading at 2.9% gross spread to the indicative offer less the 1HFY22 distribution.</div>

Irongate Group (IAP AU), previously called the Investec Australia Property Fund, is a property trust dual-listed on the ASX and JSE. IAP disclosed an unsolicited and indicative non-binding proposal from 360 Capital (TGP AU) and 360 Capital REIT (TOT AU) at an indicative headline price of A$1.65 cash per security. The offer price will be reduced by any distributions declared or paid from the date of the proposal. As IAP anticipates a 1HFY22 dividend of A$0.0453 per security, the indicative offer less the 1HFY22 distribution is A$1.6047 per security, a 7.0% premium to the unaffected price of A$1.50 (on 15 October). 360 Capital is IAP largest shareholder and represents 129.0 million IAP securities or 19.99% of IAP securities. The holding is through 360 Capital REIT and 360 Capital Group. 360 Capital built its stake from January 2021 at an average entry price of A$1.41 per security. 360 Capital is seeking a six-week exclusive due diligence period. IAP responded by noting the offer was highly conditional and uncertain particularly regarding financing. The indicative proposal is conditional on ESR Australia entering into an agreement with 360 Capital to buy several undisclosed assets from IAP’s portfolio, on terms yet to be agreed. The proposal also requires entry into new debt facilities with Citibank.  360 Capital relationship with IAP is verging on the hostile. In August, shareholders voted against the election to the board of two 360 Capital candidates after IAP’s Chairman cautioned that 360 Capital could seek to gain effective control of IAP below its fundamental value, through the board. The situation is also reminiscent of 360 Capital Group failed takeover attempt for E&amp;P Financial Group Ltd (EP1 AU). We think that indicative offer is modest in comparison to historical multiples and share prices. Given 360 Capital strained relationship with the IAP board, it is likely that 360 Capital could go hostile by launching an off-market takeover offer. At the last close price, IAP is trading at 2.9% gross spread to the indicative offer less the 1HFY22 distribution.

Irongate’s Unsolicited Offer from 360 Capital

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

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After ARA Asset Management <a href="https://www.asx.com.au/asxpdf/20180308/pdf/43s8dgxs8plthf.pdf" target="_blank" rel="noopener">acquired</a> a 19.5% stake in <a href="https://www.smartkarma.com/entities/cromwell-property-group" target="_blank" data-smartkarma-citation="entities:2780:1" rel="noopener">Cromwell Property (CMW AU)</a> on the 7 March 2018, the relationship between the two became increasingly acrimonious. This was discussed in <a href="https://skr.ma/x55u7" target="_blank" rel="noopener">Cromwell/ARA: A Festering Relationship</a>.
ARA finally <a href="https://www.asx.com.au/asxpdf/20200623/pdf/44jw1gy2d3dqg4.pdf" target="_blank" rel="noopener">announced</a> a proportional off-market takeover bid to acquire 29% of shares out in CMW, not already owned, which subsequently turned <a href="https://www.asx.com.au/asxpdf/20200824/pdf/44lsvxks2gjc60.pdf" target="_blank" rel="noopener">unconditional</a>, and ARA proceeded to appoint its own people to the board - appointments that had previously been blocked by Cromwell.
On the 4 August, <a href="https://www.smartkarma.com/entities/esr-cayman-ltd" target="_blank" data-smartkarma-citation="entities:27983:1" rel="noopener">ESR Cayman (1821 HK)</a> <a href="https://links.sgx.com/FileOpen/202108_01%20Major%20and%20Connected%20Transaction%20in%20Relation%20to%20the%20Proposed%20Acquisition%20of%20ARA%20Asset%20Managament%20Limited.ashx?App=Announcement&amp;FileID=677405" target="_blank" rel="noopener">announced</a> it was acquiring unlisted ARA Asset Management for US$5.2bn, the completion of which will result in the world's third-largest real estate management company with total assets under management of ~US$129bn. (<a href="https://skr.ma/fJECF" target="_blank" rel="noopener">ESR Cayman (1821 HK) Takes Out ARA Asset Management</a>)
On the 14 October, <a href="https://www.smartkarma.com/entities/esr-reit" target="_blank" data-smartkarma-citation="entities:10934:1" rel="noopener">ESR-REIT (EREIT SP)</a> and <a href="https://www.smartkarma.com/entities/ara-logos-logistics-trust" target="_blank" data-smartkarma-citation="entities:937:1" rel="noopener">ARA LOGOS (ALLT SP)</a> (ALOG) <a href="https://links.sgx.com/FileOpen/ALOG%20-%20Joint%20Announcement%20-%20Proposed%20Merger%20with%20ESR-REIT%20by%20way%20of%20a%20Trust%20Scheme%20of%20Arrangement.ashx?App=Announcement&amp;FileID=686935" target="_blank" rel="noopener">proposed</a> a S$1.4bn merger, where ESR-Reit will acquire all of ALOG's units in a cash &amp; scrip transaction by way of a Scheme - see <a href="https://skr.ma/wqrQU" target="_blank" rel="noopener">ARA Logos (ALLT SP) To Merge with ESR-REIT (EREIT SP)</a>. ALOG is managed by ARA LOGOS Logistics Trust Management Limited, a wholly-owned subsidiary of LOGOS. ARA Asset Management Limited is a majority shareholder of LOGOS, which operates as ARA’s logistics real estate platform. ESR Funds Management Limited, the manager of ESR-Reit, is owned by ESR Cayman Limited (67.3%).
On Irongate
Back on the 28 January of this year, <a href="https://www.smartkarma.com/entities/360-capital-reit" target="_blank" data-smartkarma-citation="entities:29046:1" rel="noopener">360 Capital REIT (TOT AU)</a> <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02335484-2A1277317?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">acquired</a> a 9.18% stake in <a href="https://www.smartkarma.com/entities/irongate-group" target="_blank" data-smartkarma-citation="entities:30897:1" rel="noopener">Irongate Group (IAP AU)</a> for $78.6mn, or ~A$1.40/security.  Together with <a href="https://www.smartkarma.com/entities/360-capital-group-ltd" target="_blank" data-smartkarma-citation="entities:11865:1" rel="noopener">360 Capital (TGP AU)</a>, that stake was bumped to 15.08% on the <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02361516-2A1291600?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">8 April</a>, 16.26% on the <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02380390-2A1301075?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">28 May</a>, 17.34% on the <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02384090-2A1303268?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">9 June</a>, &amp; 19.11% on the <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02398322-2A1311372?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">20 July</a>. This was split 12.84% &amp; 6.27% between TOT &amp; TGP. 
IAP also placed out 34mn shares at A$1.47/security on the <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02384942-2A1303629?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">16 June</a>. 
An AGM notice was issued on the <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02401181-2A1312628?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">30 July</a>, in which it detailed 360 Capital's nomination of Tony Pitt and James Storey to the board. The board recommended shareholders vote against these two board nominations. 360 Capital attempted to withdraw its nominations on the <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02413122-2A1318981?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">26 August</a>, but IAP said it was too late. At the AGM on the <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02415982-2A1320409?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">31 August</a>, those two appointments were voted down. 
The New News
IAP <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02436879-2A1331471?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">announced</a> this morning it has it received an unsolicited, highly conditional, and indicative non-binding proposal from 360 Capital REIT and <a href="https://www.smartkarma.com/entities/360-capital-group-ltd" target="_blank" data-smartkarma-citation="entities:11865:1" rel="noopener">360 Capital (TGP AU)</a>, the REIT's largest shareholder, by way of a Scheme.
The consideration price is A$1.6047/security, in cash, or a headline price of A$1.65 less the anticipated distribution of A$0.0453/security for the half-year ended 30 September 2021.
360 Capital currently holds 128.97mn securities or 19.99%. 
The indicative proposal is also conditional on "one or more of ESR Real Estate (Australia) Pty Ltd or its affiliate’s managed funds (together, ESR Australia) entering into an agreement with 360 Capital to purchase an undisclosed number of selected assets from IAP’s portfolio on terms yet to be agreed".
Hardly a clean approach. This is leaning towards a Hostile Offer. 
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More below the fold.
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After ARA Asset Management acquired a 19.5% stake in Cromwell Property (CMW AU) on the 7 March 2018, the relationship between the two became increasingly acrimonious. This was discussed in Cromwell/ARA: A Festering Relationship.
ARA finally announced a proportional off-market takeover bid to acquire 29% of shares out in CMW, not already owned, which subsequently turned unconditional, and ARA proceeded to appoint its own people to the board - appointments that had previously been blocked by Cromwell.
On the 4 August, ESR Cayman (1821 HK) announced it was acquiring unlisted ARA Asset Management for US$5.2bn, the completion of which will result in the world's third-largest real estate management company with total assets under management of ~US$129bn. (ESR Cayman (1821 HK) Takes Out ARA Asset Management)
On the 14 October, ESR-REIT (EREIT SP) and ARA LOGOS (ALLT SP) (ALOG) proposed a S$1.4bn merger, where ESR-Reit will acquire all of ALOG's units in a cash &amp; scrip transaction by way of a Scheme - see ARA Logos (ALLT SP) To Merge with ESR-REIT (EREIT SP). ALOG is managed by ARA LOGOS Logistics Trust Management Limited, a wholly-owned subsidiary of LOGOS. ARA Asset Management Limited is a majority shareholder of LOGOS, which operates as ARA’s logistics real estate platform. ESR Funds Management Limited, the manager of ESR-Reit, is owned by ESR Cayman Limited (67.3%).
On Irongate
Back on the 28 January of this year, 360 Capital REIT (TOT AU) acquired a 9.18% stake in Irongate Group (IAP AU) for $78.6mn, or ~A$1.40/security.  Together with 360 Capital (TGP AU), that stake was bumped to 15.08% on the 8 April, 16.26% on the 28 May, 17.34% on the 9 June, &amp; 19.11% on the 20 July. This was split 12.84% &amp; 6.27% between TOT &amp; TGP. 
IAP also placed out 34mn shares at A$1.47/security on the 16 June. 
An AGM notice was issued on the 30 July, in which it detailed 360 Capital's nomination of Tony Pitt and James Storey to the board. The board recommended shareholders vote against these two board nominations. 360 Capital attempted to withdraw its nominations on the 26 August, but IAP said it was too late. At the AGM on the 31 August, those two appointments were voted down. 
The New News
IAP announced this morning it has it received an unsolicited, highly conditional, and indicative non-binding proposal from 360 Capital REIT and 360 Capital (TGP AU), the REIT's largest shareholder, by way of a Scheme.
The consideration price is A$1.6047/security, in cash, or a headline price of A$1.65 less the anticipated distribution of A$0.0453/security for the half-year ended 30 September 2021.
360 Capital currently holds 128.97mn securities or 19.99%. 
The indicative proposal is also conditional on "one or more of ESR Real Estate (Australia) Pty Ltd or its affiliate’s managed funds (together, ESR Australia) entering into an agreement with 360 Capital to purchase an undisclosed number of selected assets from IAP’s portfolio on terms yet to be agreed".
Hardly a clean approach. This is leaning towards a Hostile Offer. 


More below the fold.


Irongate (IAP AU): 360 Capital's Tilt Reminiscent Of ARA/Cromwell Stoush

Australia

Irongate Group operates as a real estate investment trust. The Company focuses on investment in commercial real estate assets. Investec Australia Property Fund serves customers worldwide.

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Irongate Group (IAP AU)

Irongate’s Unsolicited Offer from 360 Capital

IAP received an unsolicited offer from 360 Capital worth A$1.6047 per security. Given 360 Capital strained relationship with the board, 360 Capital...

Arun George

Irongate (IAP AU): 360 Capital's Tilt Reminiscent Of ARA/Cromwell Stoush

$1.65/security appears a fair price - IAP stops short of saying otherwise. But this is not a clean Offer, nor is it friendly. Despite the non...

David Blennerhassett

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