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Australia's MFS Is Considering Stella Split

Australian financial services and property group MFS, target of a takeover bid from rival City Pacific, said on Wednesday it was considering separating its Stella tourism business from its financial services division.

MFS' shares were put on a trading halt pending an announcement on the proposed separation.

The move comes in response to City Pacific's proposal to acquire MFS' fund management business, which has about A$5 billion (US$4.4 billion) under management. City has agreed to buy most of MFS' funds management business in a deal worth about A$1.3 billion.

MFS has appointed UBS Australia as its advisor for considering City's offer.

"The trading halt is requested as MFS is considering a structural separation of Stella Group and MFS Financial Services via an entitlement issue to existing MFS shareholders," the company statement said.

Following the split and sale of fund management business, MFS would remain a pure tourism operator.

Last week, MFS approached troubled Centro Properties Group with an offer to manage A$8.5 billion of its property funds.

MFS shares are down 19.3 percent so far in 2008, compared with a 6 percent fall in the benchmark S&P/ASX 200 Index. MFS last traded at A$3.18.