Singapore-listed fund manager ARA Asset Management has lodged a takeover bid for Australia’s Cromwell Property Group as it decried the “erratic” and “undisciplined” strategy of the current management and board of the ASX-listed firm.
ARA is Cromwell’s largest shareholder with a 24.07 per cent stake. On Tuesday, it lodged a bidder’s statement with the ASX detailing its offer to acquire an additional 29 per cent stake through its subsidiary ARA BidCo.
“The ARA Group has become increasingly concerned with the poor operational performance, increased complexity, erratic strategy, overall governance, and risk management protocols at Cromwell,” according to the statement.
ARA added that it was left with no choice but to make an offer “to fix Cromwell and transparently return it to future prosperity.”
The asset manager said Cromwell’s alleged underperformance is evidenced by the “significant deterioration” in its operating EPS, the material 13.1 per cent reduction in distributions per Cromwell security, “poor international track record” with continued investment into the European market, and “erratic investment strategy,” among others.
“It now appears that, despite the ARA Group’s many efforts to warn fellow Cromwell security holders and to secure appropriate representation at board level, the status quo has continued, contributing to a clear and significant deterioration in the value of all of our Cromwell securities,” ARA said.
Cromwell, however, said it was unfazed by what it described as ARA’s “opportunistic” proportional takeover offer and “misleading” statements.
In an announcement, Cromwell’s board advised shareholders to take no action on ARA’s offer and ignore all documents sent by ARA or its associates.
“The Cromwell Board considers ARA’s unsolicited and conditional Proportional Offer as an opportunistic attempt by ARA to take control of Cromwell without paying security holders a premium for control and is cleverly timed to exploit current market dislocation,” Cromwell said.
It added that the offer did not value Cromwell’s fund management business and would increase ARA’s control, giving it the ability to replace the Cromwell board and influence the company’s strategy.
Cromwell said it will send shareholders the directors’ formal recommendation and detailed response to ARA’s proportional offer.
“ARA’s draft Bidder’s Statement contains misleading statements and material omissions, particularly in relation to ARA’s intentions for the future business of Cromwell. This information is critical to securityholders’ consideration of the Proportional Offer given ARA will retain an ongoing holding in Cromwell post the close of the Proportional Offer,” Cromwell added.
As part of a protracted battle, ARA Group has been seeking to install famed corporate raider Gary Weiss and Joseph Gersh to the Cromwell board. The ASX-listed firm has fought back, pointing to a potential conflict of interest as Weiss sits on the boards of companies including Straits Trading Co., which holds shares in ARA.
Meanwhile, ARA said Weiss isn’t involved in any commercial transactions or management that would result in conflicts.
As of 31 December 2019, Cromwell had a market capitalisation of A$3.1 billion ($2.2 billion), a direct property investment portfolio valued at A$3.2 billion ($2.3 billion) and total assets under management of A$11.9 billion ($8.5 billion) across Australia, New Zealand, and Europe.