Australand Property on Friday rejected an unsolicited offer from larger rival GPT Group to buy its most valuable assets, including the $2.4 billion investment property portfolio, saying it did not provide a sufficient premium.
Australand, a diversified property group 59 percent owned by Singapore based property group CapitaLand, also raised concerns the offer would leave its remaining residential business listed alone on the stock exchange with an uncertain future.
"The Board of Australand, together with its advisers, has carefully considered the proposal and has determined that the proposal does not provide a compelling value proposition and is not in the best interests of Australand's security holders," the company said in a statement.
Shares of Australand slipped 0.9 percent, against a firmer broader market.
Australand said the offer, for its commercial and industrial business and investment property portfolio, was at a premium of A$140 million ($147 million) to the book value as of June 30, and after several adjustments.
According to its website, Australand's investment property division had a value of A$2.3 billion ($2.4 billion) comprising 70 properties on June 30.
The commercial and industrial division had a book value of A$419 million. The two units combined accounted for 68 percent of fiscal 2012 earnings, according to analysts at Citi. The Citi analysts suggested a potential 10 percent premium to book value would be worth A$2.95 billion.
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If the deal went ahead, it would leave Australand's A$900 million residential division as a stand-alone listed entity. Fund managers have said that would give the division a higher cost of debt and it would lose its place in the real estate investment trust index.
Australand said it did not intend to engage with property trust GPT over the proposal.