The Centuria (ASX: CNI) share price is lifting today after it announced its proposal to merge with Primewest Group.
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The proposed merger of the two real estate platforms will result in an entity with more than $15 billion of assets under management (AUM).
At the time of writing, the Centuria share price is 1.8% higher to $2.82 per share. Meanwhile, the smaller Primewest Group share price has surged 5.8% to $1.55.
Details of the deal
Real estate group Centuria is seeing shareholder interest in today’s trading session after news of the takeover of Primewest. The update follows the group entering a bid implementation deed (BID) in relation to a merger transaction with Primewest via an off-market takeover offer.
The Primewest board has unanimously recommended the offer unless a superior proposal is received. Under the terms of the deal, Primewest security holders will receive $1.51 per security held. This will comprise 20 cents of cash per security, along with 0.473 Centuria securities per Primewest security, representing $1.31 based on the larger property group’s traded share price on 16 April.
If the merger goes ahead, the combined group will hold $15.5 billion AUM, representing an increase of 52% for Centuria.
Another potential future Centuria share price catalyst could be index inclusion. The amped-up size would have Centuria well placed for S&P/ASX 200 Index (ASX: XJO) inclusion, with an estimated pro forma market capitalisation of $2.2 billion.
Increased Centuria share price return?
It was only just under a month ago that Centuria tapped the market for $100 million in new funding. We now know where that cash will likely be going.
A combined Centuria and Primewest is expected to deliver an enhanced geographically diversified property portfolio. Primewest would add new exposure to daily needs retail, larger format retail, and agriculture sectors for Centuria.
Additionally, the board expects the merger to be financially attractive. If all goes to plan, the merge would add 4% to Centuria’s FY21 pro forma earnings per security.
Centuria chair Garry Charny provided commentary on the announced merger:
The proposed Centuria/Primewest merger is consistent with Centuria’s dual strategy of asset acquisitions and corporate M&A, where this is sympathetic to Centuria’s business model.
Primewest is a high quality, well-established fund manager and the Centuria board looks forward to the successful completion of the merger and building on Centuria’s position as a leading Australasian property fund manager.
Lastly, the proposed merger is contingent on gaining a minimum acceptance of at least 90% of all Primewest securities. BID statements will be dispatched mid-May, where security holders will have the chance to vote on the proposal. If all bidder conditions are met by mid-June, the merger process will commence.
The Centuria share price has delivered a terrific 67% to shareholders. However, throwing in dividends payouts on top, trailing 12-month returns boost to 80.3%.
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Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.