Investors picked off from property sector's best performing company

By Campbell McIlroy

Friday 2nd June 2000

SHORE CITY: One of St Lukes' 11 shopping centres

The temptation of a 40c per share premium may be too much for small St Lukes Group shareholders to resist as Australia's Westfield tries to amalgamate the solidly performing company.

The listed property sector will be dealt a blow if shareholders accept the offer and the shopping mall company is removed from the New Zealand Stock Exchange.

The $1.70 a share price represents a significant premium to the $1.30 the shares were trading at at the beginning of the week.

The amalgamation still has to be approved by 75% of the non-Westfield shareholders.

But analysts have suggested it was a foregone conclusion as there was very little likelihood the shares would have reached this level over the next two to three years, and the price represented a significant premium to the company's net asset backing and institutional valuations.

Brokers said they would advise investors to accept.

One analyst said it was another good company heading offshore which made the listed property sector here a lot thinner.

He added that a lot of people might see it as a good opportunity to exit the underperforming property sector altogether.

"Given the office sector is pretty much what was left I don't think people will be running to them," he said.

Property for industry managing director Peter Alexander said this was positive for the sector as it might remove an overhang of negative investors who were natural sellers from the market.

There were still a lot of investors who wanted the regular income listed property stocks offered and he expected investors would rebalance their investments back into the remaining stocks.

It also created an opportunity for a new retail product which had been prevented by having such a dominant player as St Lukes in the market, he said.

Westfield will outlay $560 million to take over New Zealand's largest shopping centre company bringing an end to one of the country's top performing property stocks.

St Lukes Group shareholders and convertible note holders will be offered the opportunity to buy units in Westfield Trust, which is listed on the Australian Stock Exchange, free of brokerage and stamp duty costs.

St Lukes has committed itself to a $1 billion development program and chairman Bill Falconer said the amalgamation would enable better access to capital across the Tasman for the development program.

St Lukes Group shares started the week at $1.31 but were up 24% at $1.63 on Thursday morning following the offer.

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