ARA Doubles Down on Cromwell Takeover

Cromwell has issued its shareholders with a swift “take no action” direction in response to a part takeover bid from its largest shareholder, the Singapore-listed ARA Asset Management.

ARA’s $520 million proportional bid represents a 29 per cent buy-out of Cromwell at 90 cents per share. ARA said that the bid represents a premium of 9.8 cents to Cromwell’s 30-day volume-weighted average share price of 82 cents.

ARA currently holds 24 per cent of Cromwell’s securities. The bid, for which ARA has received FIRB approval, would lift its stake in Cromwell to about 46 per cent with creep provisions allowing it to close in on 50 per cent before the year is out.

ARA chief executive John Lim said that Cromwell has left the S$88 billion asset fund manager with “no choice” but to pursue a takeover.

“We seek change based on our strong belief that the existing Cromwell strategy is failing and exposing our investment to unacceptable risks,” Lim said.

Lim, and ARA’s Australian senior management, has consistently agitated for change at Cromwell, criticising the company’s corporate governance, financial performance and its European acquisition strategy—in particular Cromwell’s $1 billion purchase of a portfolio of Polish shopping centres.

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Lim said that ARA is concerned that Cromwell may look to pursue an equity raising at a discount to ARA’s 90cps offer. Cromwell chief executive Paul Weightman told the Financial Review in May that the group was not considering raising capital, despite concerns about negative asset revaluations and the level of gearing across the group’s balance sheet.

In an update to the ASX in June, Cromwell said that its gearing remains well within its debt covenant limits at 40 per cent.

The bitter, very public, fallout between the Brisbane-based property fund and its largest shareholder kicked off in mid-2019 after Cromwell blocked ARA’s bid for stock in a $375 million capital raising.

The dilution of ARA’s shares in Cromwell was followed by the narrow rejection of activist investor Gary Weiss from its board, after which Cromwell began issuing missives to shareholders asking for help to “protect” it from an ARA “takeover by stealth”.

ARA is receiving legal advice from Arnold Bloch Leibler and financial advice from Moelis and Credit Suisse.

In response to ARA’s bid, Cromwell advised its shareholders to take no action, noting the “unsolicited and opportunistic nature” of ARA’s proportional offer.

Cromwell said it will respond once it has evaluated and assessed the terms of ARA’s offer.

Cromwell closed 8 per cent higher at 94 cents on Tuesday.