No official confirmation of Mirvac proposal to merge with Australand

There has been no official confirmation of a bid by Mirvac to merge with Australand in a move that would create a $7 billion listed property trust.

Australand posted an ASX statement to say that it was “not in receipt of any such proposal” with Mirvac, providing the same Australand statement.

Mirvac later sent an email to the Australian Financial Review (which broke the story) that it continually assesses opportunities to increase shareholder value.

"We are also aware of our continuous disclosure obligations and there is nothing to disclose."

An article in the Australian Financial Review claimed that Mirvac, under the new leadership of Susan Lloyd-Hurwitz, was preparing a proposal to merge with its smaller rival.

The mooted merger proposal follows the Australand board rejecting an offer from GPT to acquire its non-residential businesses for $3 billion.

The AFR article did not name any source for its story, but says the proposal is being considered by Mirvac advisers Citigroup and is at an “early stage”.

For the deal to go through, it would need the backing of Singaporean real estate giant CapitaLand, Australand’s controlling shareholder.

AFR veteran property editor Robert Harley said a Mirvac merger proposal would be a better fit than GPT only wanting Australand's commercial assets.

Goldman Sachs A-REIT analyst Peter Zuk notes that the AFR article suggests that other parties could potentially join the offer process, including industrial specialist Goodman Group and Lend Lease.

Zuk says he could see a “strategic rationale” for the merger and says it would not surprise the investment bank “if some/all of these parties were interested in having a look at Austrland’s assets”

“Focusing on the reported potential Australand/Mirvac merger, we can see the strategic rationale behind any potential merger given the similarities between their business models,” says Zuk.

"Whether on a stand alone basis or a combined entity basis, we see both Mirvac and Australand as having leverage to:

• The Australian residential market recovery;
• Sourcing cheaper debt
• Lower corporate overheads."

Recent mergers/takeovers in the listed REIT space include Goodman Group (GMG) and its consortium acquiring the then listed ING Industrial Fund in March 2011 and Blackstone acquiring the Valad Property Group in May 2011.