DNZ out to create property colossus

DNZ Property Fund chairman Tim Storey. Photo / Sarah Ivey

A new listed real estate vehicle worth more than $1.4 billion could hit the NZX if DNZ Property Group's surprise hostile takeover move on Argosy Property Trust goes ahead.

NZX-listed DNZ has real estate valued at more than $700 million and fellow NZX-listed Argosy has 81 properties worth more than $900 million.

In this year's biggest property shake-up, the smaller DNZ wants to swallow its much larger rival.

Tim Storey, DNZ chairman, made a surprise announcement yesterday that his business had approached Argosy, which has just announced it wants to internalise its management in a controversial $32.5 million deal.

Peter Brook and Trevor Scott, Argosy independent directors, rebuffed DNZ's takeover.

"[We] consider that unitholders are likely to secure greater value from an initial internalisation along the lines proposed.

"Ultimately the decision is one for unitholders and explanatory materials, together with an independent report on the internalisation proposal, is in the course of preparation for unitholders' benefit," Scott and Brook said, adding that they did not have sufficient information to enable them to comment in any more detail on DNZ's approach.

The two businesses are not connected and are rivals for tenants, controlling a mixed national portfolio of real estate and operating in the highly competitive property business.

DNZ has become a star NZX performer, piling on the price in the last few months after the market liked its new corporate structure and internalised management.

Argosy is the former ING Property Trust, whose management is owned by OnePath, controlled by ANZ National Bank.

Storey said the takeover approach resulted in DNZ getting the cold shoulder.

"Unfortunately after our initial approach the independent directors of Argosy have so far declined to engage constructively. While we have not had the opportunity to engage with Argosy or complete due diligence, we believe there is an opportunity to structure a merger of the two businesses that provides a better value outcome for Argosy unitholders, both immediately and over time," said Storey.

Public comments from several Argosy investors demonstrated there were concerns with the Argosy internalisation proposal and the suggested $32.5 million payment to the shareholder of the manager, he said.