The takeover attempt is the latest round of hostilities in a protracted fight between Cromwell’s management and ARA for control of the company.
ARA has been tussling with Cromwell, accusing its board of “antagonistic behaviour” towards its concerns about the direction of the company and the high levels of debt it has accumulated since it splashed $1 billion on a portfolio of Polish retail assets it acquired in August last year.
“ARA intends to drive a vital process of board change and renewal to improve governance and urgently address deteriorating operational performance,” ARA chief executive John Lim told the ASX.
“ARA is seeking to increase its holding to protect its significant investment in Cromwell through a reinvigorated board with a clear proprietorial focus.”
“ARA has been left with no choice but to pursue this course to try and restore value for the benefit of ARA and all security holders in Cromwell,” he said.
Cromwell’s management was quick to react to the bid advising security holders to “take no action”.
‘ARA has been left with no choice but to pursue this course to try and restore value for the benefit of ARA and all security holders in Cromwell.’
ARA chief executive John Lim
“Cromwell notes the unsolicited and opportunistic nature of the proportional offer and that the proportional offer is not an offer to acquire all securities held by security holders in Cromwell,” the group said.
The property landlord, which is being advised by Goldman Sachs, UBS AG, MinterEllison and Corrs Chambers Westgarth, said it will evaluate the bid and provide a response in “due course”.
Cromwell has also accused ARA of having an association with another significant shareholder in the property trust, the Tang family, led by Chinese billionaire investor Gordon Tang.
The Tangs announced late last week that their interests had increased their stake between December and April to 16.67 per cent from 13.7 per cent previously.
Cromwell took the Tangs to the Takeovers Panel last year to seek a declaration that ARA and the Tangs had an undeclared association, however, the panel rejected the application after a preliminary review.
Earlier this month, The Age and the Sydney Morning Herald revealed Mr Tang’s chequered business history in China. At the time of that report, ARA denied it had made any application to the Foreign Investment Review Board to increase its stake in Cromwell.
On Tuesday, it announced it had FIRB approval to make the offer.
ARA has made two pushes to replace members of Cromwell’s board with their nominee, famed corporate raider Gary Weiss, and failed at each attempt after not winning enough support from other shareholders.
ARA said it continued to publicly highlight concerns about a “potential of a dilutive capital raising” from Cromwell’s high debt levels and exposure to the Polish retail assets.
“Cromwell has continued to discriminate against ARA and display antagonistic behaviour, despite the board’s clear fiduciary obligation to represent the best interests of all security holders,” it said in a statement to the ASX.
Cromwell chief executive Paul Weightman came out swinging after an afternoon board meeting to discuss ARA’s offer.
“Clearly the offer is materially below our NTA (net tangible asset backing) and doesn’t properly value the business.”
“It’s an opportunistic exercise for ARA to gain control without needing to pay a proper premium and a further example of a takeover by stealth.”
“Our message to shareholders is don’t let them take your company away from you,” he said.
Simon Johanson is a business journalist at The Age and The Sydney Morning Herald.
Sarah Danckert is a business reporter.