Bbc Calls In Cavalry To Revive Share Price

The Age

Tuesday July 1, 2008

Carolyn Cummins

BABCOCK & Brown Communities will look at all possibilities to lift its ailing share price closer to its underlying asset value, as part of a strategic review.

The group's independent chairman, Judith Sloan, confirmed yesterday ABN Amro had been appointed as an external adviser to undertake the review.

The review was flagged only days before Lend Lease emerged as the buyer of a 6.18% stake in BBC, having paid 45 a security to vendor ING.

BBC closed down .05 to 43 yesterday, giving it a market capitalisation of $280.24 million. BBC's average net tangible asset value is about 80.

Lend Lease chief executive Greg Clarke has identified retirement homes as a growth sector that is attractive to his group.

Babcock & Brown is the other major investor in BBC with a 10% direct stake, but it also holds a potential poison pill in the form of a 10-year management agreement.

Termination of the agreement would require approval from Babcock & Brown, and it could cost a predator between $30 million and $50 million to break the contract.

Any takeover of BBC would thus need to be a friendly one in order to persuade Babcock & Brown to relinquish the management agreement and the lucrative annual management fees.

"ABN Amro has a high-level mandate to narrow the gap of the real value (net tangible assets) and where the securities are trading on the ASX," Professor Sloan said.

"Every option is on the drawing board. That could include potentially merging our assets with other similar businesses, trading down other unit-holder stakes such as Babcock & Brown's 10% to overseas interested parties selling assets, and attracting other interested partners.

"It must be pointed out that this is a review agreed to by all the BBC board, including our Babcock & Brown representatives.

"But we must improve the value of the business to investors, and it has not helped us that our mother ship (Babcock & Brown) has had its troubles."

BBC is the owner and manager of 56 retirement villages and 29 aged-care facilities across Australia and New Zealand comprising about 10,000 retirement units as well as 2200 residential aged-care beds.

Its biggest competitor, with a marginal 3% market share, is FKP, which two weeks ago rejected a $1.3 billion offer from Lend Lease and AMP.

Professor Sloan said there were few investment opportunities such as BBC that offer the same direct access to this market with strong growth prospects underpinned by ageing demographics.

KEY POINTS

ABN has been appointed to conduct a strategic review.

All options to revive BBC's share price will be reviewed.

BBC's shares are trading under their net asset value.

© 2008 The Age

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