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Salt Funds Management has urged NPT shareholders to vote against an offer from Kiwi Property Group that would result in Kiwi taking over its management contract, selling it two Wellington properties and ending up with a cornerstone stake.
Next month, shareholders will vote whether to back the deal, under which Kiwi Property would sell the North City Shopping Centre in Porirua and Majestic Centre in downtown Wellington to NPT for cash and shares worth $230 million. NPT would raise $100 million of new equity as well as a $50 million issue to Kiwi Property for a 19.9% stake to help fund the deal. Kiwi Property would pay $6 million for the management contract of the enlarged portfolio, which it would more than recoup within three years of collecting fees of about 0.5% of assets under management, reaping an annual $2.1million.
NPT would fund the acquisition by borrowing $87 million and by making a pro-rata entitlement offer of new shares to eligible NPT shareholders to raise about $94 million. In materials explaining the Kiwi Property offer, the board based its forecasts on a one-for-one rights issue at 58c per share. The shares last traded at 60c.
In a letter to NPT directors and shareholders, Salt Funds managing director Matthew Goodson said the deal "represents an unacceptable transfer of value from NPT shareholders to KPG" and the fund manager, which is a substantial shareholder of both NPT and Kiwi Property, is strongly opposed to the deal and urges all shareholders to vote against it.
Salt Funds has owned 16.9% of NPT since June 24, 2016, and held 5.3% of Kiwi Property as of January 16 this year.
"After sharply underperforming its NZ property peers in recent years, NPT is now proposing a 1/1 raising at a deep discount to NPT’s net tangible assets," Goodson said.
- Sophie Boot