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Private equity-backed AVID Property Group has launched a $374.6 million takeover bid for AVJennings (ASX: AVJ) in a move that aims to solidify the foreign-controlled group’s residential development footprint on Australia’s eastern seaboard.
Just five years after wrapping up a takeover of Gold Coast-based developer Villa World for $410 million, AVID Property Group is looking to add AVJennings’ pipeline of almost 10,000 residential lots to its portfolio which comprises 45 projects in NSW, Victoria and Queensland.
If the takeover succeeds, it will almost triple AVID’s existing portfolio comprising 6,300 residential lots with a gross revenue pipeline of $5 billion and give the group exposure to the South Australian and New Zealand markets where AVJennings also operates.
Proprium Capital, the company that manages AVID Property Group on behalf of global institutional investors, last year further bolstered its Australian real estate holdings through the $284.5 million acquisition of the Puljich family’s Living Gems business to create the $1.1 billion Vantage land-lease-communities portfolio of about 3,800 sites across 14 projects.
AVJennings announced today that it has received an “unsolicited, incomplete and non-binding indicative proposal” from Proprium Capital Partners and AVID Property Group through its investment vehicle PM Nominees C Pty Ltd to acquire all of the outstanding shares in AVJennings for 67.1c per share.
The indicative price is more than twice the AVJennings closing price of 33c yesterday, leading to a 97 per cent spike in the company’s stock this morning to a high of 65c at 10.13am (AEDT).
After negotiating with AVID for the past three months, the AVJennings board is backing the proposal announced today and has granted the company exclusive due diligence for AVID to put forward a binding offer via a scheme of arrangement, possibly by January.
“Directors believe that the indicative proposal, subject to agreement of final terms, would provide AVJ shareholders with an opportunity to realise their investment in AVJennings at a price significantly above its historical trading levels with certain value through all-cash consideration,” says AVJennings.
“The directors have granted AVID access to a confirmatory due diligence period through to the end of January 2025 and exclusivity to facilitate a binding proposal, allowing for the upcoming Christmas and New Year holiday period.”
The cash offer also proposes to allow AVJennings to pay a fully franked special dividend on or before the scheme implementation date, which will make shareholders eligible for up to 6c per share in franking credits.
A successful takeover is also subject to Foreign Investment Review Board approval, as well as court and shareholder approvals.
The takeover play by AVID Property Group follows a challenging year for AVJennings in FY24, although an update earlier this month revealed a 29 per cent increase in property settlements for the September quarter with inquiries for new homes and land running in line with the previous quarter and the previous corresponding quarter in 2023.
“The company continues to view South-East Queensland and South Australia as the strongest markets in the near term,” said AVJennings in its latest update on 4 November.
“NSW continues to show signs of a recovery, while expectations are for a slower recovery in Victoria with only very early signs recently seen.”
AVJennings’ FY24 earnings were impacted by a $17.8 million write-off on an abandoned Queensland housing project and a fall in profit margins, with the company posting a net profit of $1.57 million for the period.
Even after stripping out the impact of the impairment, AVJennings would still have recorded a 44 per cent decrease in net profit after tax to $19.4 million for the year.
AVJennings says it first received an “incomplete preliminary offer” from AVID Property Group on 2 August 2024, with the offer subject to a confidentiality agreement.
“A sub-committee of the AVJ board, in consultation with its financial and legal advisers, carefully assessed the merits of the incomplete preliminary offer and determined to grant AVID an initial period of due diligence to advance the preliminary offer,” says the company.
“Since the initial approach, both parties have held extensive discussions and negotiations, resulting in the improved indicative proposal of 67c per AVJ share received on 27 November 2024.”
AVID Property Group’s parent Proprium Capital Partners, which was established in 2013 via a spin-out from the Morgan Stanley Real Estate Special Situations group, has more than US$4 billion ($6.2 billion) in net assets under management in the living, hospitality, and logistics sectors with offices in the US, Europe and Asia Pacific.
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