ALE Property Group and its 78 pub freeholds could be under new ownership by mid-December following a takeover offer announced this week.
Industry super fund Hostplus and property investment company Charter Hall are collaborating on a $1.68bn offer that will see them become Australia’s largest owners of freehold pub assets.
ALE’s directors are backing the joint bid from Charter Hall Long WALE REIT (CLW) and Hostplus, with each set to own 50 per cent of ALE’s assets upon completion.
Board members of the ASX-listed pub property group – which owns pubs that are leased to Australia’s largest operator, Endeavour Group – are unanimously recommending ALE shareholders vote in favour of the deal, which offers a significant premium to valuations of the portfolio.
The offer includes cash and scrip, and under the deal, ALE shareholders will receive 0.408 CLW securities, $3.673 in cash, and a 5.5 cent dividend for each ALE security owned.
In 2014, Charter Hall and Hostplus teamed up to buy 54 pubs off ALH – now part of the ASX-listed Endeavour – for $600 million, with ALH continuing to operate the pubs on long term leases.
ALE’s flagship pubs include and Sydney’s Crows Nest Hotel (pictured), Young & Jackson in Melbourne, and Queensland’s Breakfast Creek Hotel. According to Charter Hall, 99 per cent of ALE’s properties are located in metropolitan locations, and 94 per cent are on Australia’s east coast.
Moreover, the properties have low site coverage of 25 per cent and offer “potential mixed and alternate-use opportunities in the long term”, Charter Hall says.
ALE chairman Robert Mactier described the proposal as “highly attractive” for ALE shareholders, as it reflected a material premium to ALE’s trading price and the revised independent valuation of ALE’s portfolio.
“After careful consideration, the ALE board has concluded that the proposal is in the best interests of ALE securityholders and unanimously recommends that securityholders vote in favour of the schemes, subject to no superior proposal and the independent expert concluding that the schemes are in the best interests of ALE securityholders,” he said.
CLW fund manager Avi Anger said the transaction was designed to deliver significant benefits to both ALE and CLW shareholders.
“The transaction is consistent with CLW’s strategy to invest in high-quality real estate assets that are predominantly leased to corporate and government tenants on long-term leases.
“We are pleased to be able to continue our partnership with Hostplus, a leading Australian superannuation fund, in investing in high-quality pubs and liquor retail outlets leased to Endeavour Group.”
Shareholders will be sent scheme booklets in mid-November, shareholder approval will be sought in early December, and implementation of the takeover is expected to occur in mid-December.