ARA Asset Management lodges takeover bid for ‘erratic’ Cromwell Property

ARA Group CEO and co-founder John Lim speaks at the Asia PE-VC Summit 2019 in Singapore. Photo: DealStreetAsia.

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.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.