Hometown ups the pressure to grab Gateway Lifestyle
The battle for control of the affordable manufactured home estate group Gateway Lifestyle has intensified with Hometown America now sweetening its bid with the option to include the distribution, should the deal be implemented.
Hometown has altered its latest tilt to an off-market bid, thereby dropping its demand for due diligence, but it does require unanimous commitment by Gateway’s board to recommend the bid and be given equal access to information.
Hometown upped its offer last week to $2.30 to counteract Brookfield’s offer of $2.30 for a Gateway security. But Hometown will now go to $2.3535 to take into account Gateway’s 5.35¢ distribution.
It added that the latest bid ”has lower completion risk and delivers a shorter timeframe to completion than the Brookfield proposal”.
Hometown has a direct interest in Gateway of about 9 per cent, which it bought last week from Perennial Value Management and effective control of a total of 18.8 per cent under an agreement with Gateway’s main shareholders, Colonial First State, WaveStone Capital and Maso Capital.
Gateway Lifestyle securities are trading at $2.35. The offer values Gateway at about $715 million.
Gateway Lifestyle’s chairman Andrew Love advised shareholders to ”take no action at this point’.
”Gateway notes the announcement by Hometown in relation to a conditional, off-market takeover bid for all the stapled securities of Gateway Lifestyle. The Gateway Lifestyle board is currently considering the announcement and its implications for Gateway security holders,” Mr Love said.
Macquarie Equities analysts say, while the value proposition for further bids could be diminishing, ”in our view, with Gateway in play, we would not rule out further competitive tension”.
”We highlight the prospect of an improved bid from Brookfield; Singapore’s GIC has recently acquired 10 sites in Western Australia, clearly showing interest in the sector and there is potential that other parties, either listed or unlisted, that can extract synergies or are attracted to the long-term cash flows of the rental stream are likely also interested,” the Macquarie team says.
The attraction for the business, which manufactures homes on estates aimed at retirees who buy a leasehold property and then pay rent for the land to Gateway, is the growth in demand from the ageing population and the income stream from the rent.
One analyst said Hometown America and Brookfield have investments in similar business overseas and consider Gateway as a good entry point for expansion in Australia.
”In the long term, Brookfield and Hometown America see the income stream and ageing population as growth stream,” the analyst said.
”APG bought into Lendlease retirement business as they are attracted to what they consider a growth sector.”
New residents of Gateway properties tend to be looking for affordable retirement homes and they are selling their existing home to first home buyers as the price point is more affordable.
”This announcement from Hometown is starting to provide some certainty for Gateway unitholders, particularly as no dye diligence is required,” Macquarie Equities said.
”We note this latest offer is above the pricing where Brookfield was provided due diligence; the offer is towards the upper end of our merger and acquisition valuation range and the offer is at a 29 per cent premium to the pre-bid share price of $1.83 on June 12.”
