Results due for property rivals

Peter Brook and Trevor Scott, Argosy's independent directors. Photo / Glenn Jeffrey

NZX-listed DNZ Property Fund and its takeover target Argosy Property Trust issue annual results this week - DNZ this morning and Argosy on Friday.

Analysts and institutional investors are watching the results closely because both stocks are in play: DNZ wants to issue Argosy unit-holders with shares, swallowing the much bigger business to create a $1.6 billion company, but a double-play is afoot because Argosy unit-holders have to decide whether to buy out their managers for $32.5 million in an internalisation move.

How these businesses have performed in the past year and what they say about their prospects for the current financial year could have a big influence on how those deals proceed.

DNZ has the tail wind, having won institutions over in the past few months after its own controversial, radical restructuring.

The takeover has got approval from some analysts who see big savings.

First NZ Capital's Jason Lindsay said the two portfolios were remarkably similar and on the face of it could be a nice fit.

"There would seem to be a place for a large, lesser quality, diversified property vehicle in the New Zealand market if a deal can be structured to benefit both sets of shareholders - and remember there is virtually no detail to date," he said.

"Depending on whether the proposed $32.5 million internalisation proceeds or unit-holders of Argosy vote to dismiss the manager for a somewhat lesser 'poison pill' fee of around $12 million, in some ways this is not a concern for DNZ and will be decided by Argosy investors with the benefits of a lower fee being reflected in a higher NTA and therefore more share in DNZ on merger.

"All benefits of a potentially cheaper severing of the manager should accrue to Argosy unit-holders in our view," Lindsay said.

Trevor Scott and Peter Brook, Argosy's independent directors, said they wanted to "carefully evaluate the potential of any merger and, in particular, how the properties owned by DNZ could be integrated into a combined portfolio, tax, gearing, distribution and other relevant matters.

"The central focus, however, remains on the strategic initiative to internalise the management contract in the most effective and timely manner ... " Scott and Brook said.