Capital posts profit lift, rejects AMP offer

Takeover target Capital Properties today reported a 10 per cent higher first half profit, and announced it was sticking to the view that shareholders should snub AMP Property Portfolio's advances, despite its revised $1.48 per share offer.

Capital Properties posted a net profit of $10 million for the six months to September 30, buoyed by rental income growth, reduced vacancies and the inclusion of Centre City Shopping Centre, which was acquired in December 2004.

Capital Properties also recorded a net revaluation gain of $49.7 million over the six month period, based on independent valuations and partial recognition of the development margin for Defence House, currently under construction.

The listed property trust's net annualised income yield was 8.3 per cent, occupancy levels were 99.4 per cent and the weighted average lease term at balance date was 4.29 years.

AMP Property Portfolio, a $600 million unlisted fund managed by AMP Capital, launched its original bid for the trust in September after building a 16 per cent stake at an average price of $1.35.

Last week, AMP upped the ante in the increasingly acrimonious takeover tussle, raising its offer from $1.42 to $1.48 and announcing it had the property trust's biggest shareholder - Kiwi Income Property Trust (KIP), on side.

Tony Frankham, chairman of Capital Properties' independent directors committee, said the directors had considered the fresh offer, but were standing firm on their advice for shareholders to retain their holdings.

Mr Frankham said the increased price was at the bottom of the fair value range determined by independent advisors Deloitte, which valued Capital Properties at $1.48 to $1.73 per share.

"The independent directors do not believe that the offer price of $1.48 adequately reflects the fair value of Capital Properties' shares including the control premium usually paid in a takeover."

Mr Frankham also took the unusual step of naming the price at which the directors would back AMP's bid: $1.55.

The move puts AMP in a tight spot. Under the terms of the Takeovers Code, with the bid is set to expire on November 16, AMP can not vary its closing date or price without declaring the offer unconditional.

The bid is currently conditional on AMP achieving a minimum of 50 per cent of acceptances. With KIP's shareholding, its current stake is 36.2 per cent.

Mr Frankham was careful to point out that sticking with the company carried risks for shareholders, however.

If AMP gets 50 per cent, but not full control, it may choose to sell assets or reduce Capital Properties' dividend payout and minority shareholders will have to go along for the ride.

If the offer lapses, or if AMP achieves 50 per cent, but not the 90 per cent required to spark a compulsory takeover of all minority holdings, the share price will likely fall below $1.48, Mr Frankham said.

No offers were likely from other suitors, he said, so shareholders should consider whether their individual circumstances made accepting the AMP offer advisable.

Shares in Capital Properties last traded flat at $1.46.

- NZPA