Aussies open purse for St Lukes group

The latest offer for the property giant is timely for shareholders, writes KARYN SCHERER.

Australia's largest listed property trust has launched a $570 million bid for shopping mall owner St Lukes Group, in a deal it has described as a vote of confidence in the New Zealand property sector.

In a move that is no surprise to investors, Westfield Trust is offering 170c a share for the 54 per cent of the group it does not already own.

St Lukes, floated in 1993, is New Zealand's largest listed property company and includes most of the main shopping malls.

The offer values the group at $725 million and, if approved by investors, will create a $7 billion property company with 39 shopping centres across New Zealand and Australia.

The bid comes after a year of steady decline in St Lukes' share price, and the company's independent directors have recommended investors accept.

Chairman Bill Falconer said yesterday that directors were happy with the price, as it was significantly higher than the price its shares and convertible notes had been trading at over the past month. It was also higher than most analysts currently valued the company, and within the range recommended by its independent advisers.

According to Westfield, it is making the offer as it believes it will be easier and cheaper for the enlarged company to raise around $1 billion needed over the next few years for its redevelopment plans. It is redeveloping its Glenfield Mall in Auckland, and planning a big expansion of Henderson's WestCity.

The company is keen to redevelop its Riccarton, Queensgate, St Lukes, Manukau and Pakuranga shopping centres, as well as build two new centres in Albany and Newmarket.

Speculation has been rife among Newmarket retailers that St Lukes has abandoned its plans to develop the former Mercury Energy site, and is eyeing the Two Double Seven centre across the road. Former St Lukes chief executive Victor Hoog Antink, now director of funds management for Westfield Trust, insisted yesterday that St Lukes was close to announcing its plans for the Mercury site.

Westfield is also downplaying any suggestion that another New Zealand company is being snapped up by foreigners. St Lukes investors who want to reinvest in the enlarged company are being offered the chance to buy shares in Westfield Trust, which is also listed on the New Zealand stock exchange, without having to pay stamp duty or brokerage fees.

Mr Hoog Antink said Westfield was keen for the market to see the move as a "vote of confidence" in New Zealand.

"We are looking to create a portfolio with world-class shopping centre and entertainment facilities and the market in our view has the capacity and the need for those to be created."

Because of the complexity of St Lukes' capital structure, which includes a mix of shares, convertible notes and capital notes, the directors are seeking High Court approval of the proposal. Shareholders and convertible noteholders will be asked to approve the move at meetings next month, and the company hopes to have it sewn up by the middle of July.

Westfield will fund the purchase by raising $A250 million from institutional investors and through existing debt facilities.

The deal will also end confusion over the relationship between Westfield and St Lukes. Westfield Holdings, controlled by Frank Lowy and his family, is the Sydney-based umbrella company which manages Westfield Trust.

A Westfield Holdings subsidiary, Westfield NZ, took over management of St Lukes Group's portfolio in 1997. BT Funds Management then sold its controlling shareholding to Westfield Trust the following year.