Many current shareholders in NZX-listed Augusta Capital might sell their holdings once the $169.5 million takeover by an ASX-listed entity is completed soon, a professional investor says.
Because Centuria Capital Group's takeover for Augusta is a scrip plus cash offer, many retail investors won't want to hold their new Centuria shares in the longer term.
Craig Tyson, Australasian head of property securities at ANZ, thinks some retail investors will sell.
The takeover offer means they own shares in a foreign country, thereby exposing them to currency fluctuations, he says.
Tax implications and shut borders add to difficulties meaning Augusta shareholders will be unlikely to be able to go to Australia to attend company meetings, whereas they have been able to meet in Auckland in the past few years.
The deal leaves Augusta managing director Mark Francis locked in until 2023, with gradual release clauses from his substantial holdings.
He said his about 13 per cent of the listed business would result in him netting $22m in assets - 80 per cent Centuria shares and the rest cash.
Centuria is today trading around A$1.69 and has a market capitalisation of A$864m.
"That's at the current trading price," Francis said this week, indicating that $22m could go up or down, depending on that share price between now, the deal's settlement and when he is obliged to hold his new Centuria shares.
What will he do with that windfall?
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"There's a three-year lockup," Francis said from Queenstown, where he is holidaying with his family. "Every year, a third is released if I want to sell."
He also stressed he would remain managing director of the New Zealand portion business for three years.
"Essentially, it's business as usual with a change of name on the door," he said referring to Centuria's name going up Augusta's offices in Bayleys House.
"We've not decided when that re-brand happens. But the business remains the same, except we have a bigger balance sheet."
Asked if he has plans for the about $22m he gets by 2023, Francis said: "No, not really."
But he stressed he did not want emphasis placed on him receiving the scrip and cash because he said the deal was not about him or what he was receiving and he did not want to invite any criticism.
Augusta has a market capitalisation of $157m and is trading around 92c. Centuria has offered 22 cents cash and 0.392 of stapled securities in Centuria per Augusta share.
On July 8, Centuria declared its offer unconditional because as well as the 23.3 per cent of the shares it owns, it had acceptances amounting to 65.9 per cent of the Auckland-headquartered business.
Paul Duffy, Augusta chairman, said: "We believe accepting the offer is in the best interest of all Augusta shareholders".
In the target company statement, Mark Francis was listed as owning 20m Augusta shares. The business has 171 million shares issued.
The deal has not been met by everyone with praise, and Francis acknowledged comments made by readers of a business publication that criticised Augusta's board for the way it had acted in responding to Centuria.
Centuria made an earlier offer at a much higher price, but put that on hold when the pandemic broke out.
This week, Jarden Equity Research's Arie Dekker and Grant Lowe released an analysis of the listed property sector in New Zealand. That mentioned Augusta's failed purchase of the Albany Lifestyle Centre but said the company's tenant exposures across all its business looked "reasonably good".
"Over the medium term, Argosy has the potential to lift its dividend on the back of letting up, development activity and ultimately lower interest rates. That may begin to smooth the path to higher dividends as early as FY22 so long as it is able to manage through the upcoming economic downturn and maintain occupancy and rental levels," Dekker and Lowe said.
Augusta's share price fell because of Covid-19, along with many other real estate businesses on the NZX, but had since recovered.