Property, investment mergers in the offing

By Chris Hutching

Friday 5th May 2000

Colonial First State Investment Managers chief executive Bruce Abraham says the company's pending takeover by Commonwealth Bank will provide opportunities for consolidating and expanding investment trusts such as the Colonial First State Property Trust.

Commonwealth Bank of Australia is making a $A9 billion friendly takeover bid for Colonial, a move expected to usher in further rationalisation and redundancies in the financial services industry in this country and Australia.

The Commonwealth Bank owns 75% of ASB Group, which in turn owns ASB Bank, Sovereign and ASB Life. The Sovereign Group is involved in insurance and management of investments including property trusts. It may be logical to merge some of those investment trusts if this achieves management savings. The new merged trusts would most likely contain a mix of Australasian or international assets.

Like other listed property trusts, Colonial First State Property Trust continues to trade at a discount to asset backing and a discount to the listing price. But it has improved its earnings rate and represents reasonable value for new unit buyers.

Mr Abraham would be well placed to play a key role in the New Zealand management team led by David May, managing director of Colonial New Zealand.

For Mr Abraham, the position is a turnaround from the past couple of years when Colonial was doing the corporate hunting.

He was in Colonial's takeover and makeover team that acquired Prudential's insurance, property and investment operations, overseeing a programme of staff reduction and consolidation.

Mr Abraham took a hands-on role in the incorporation of Prudential's property investments into the Colonial First State Property Trust, of which he is chairman.

This time Mr Abraham and his team are the "hunted" but he said these were early days in the takeover process.

"Last year we were doing the buying so it was our timetable. This time we're being bought so we have to wait to find out what the bigger picture will be.

"But acquisition is the fastest method of expansion and you would expect there would be many opportunities relating to our property trusts and other investments arising from this merger.

"There are some exciting things to be done. There are a number of businesses that need to be put together."

CBA is expected to offer Colonial shareholders $A8.50-9 a share in a scrip-for-scrip deal, the deal hinging on 75% approval of shareholders.

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