Aspen’s play for Eureka hits share raid hurdle

Builder and developer Ben Cottle has escalated the takeover battle for Eureka Group, upping his stake in the affordable accommodation provider to 13 per cent.

Aspen Group's lifestyle asset Sweetwater Grove

The battle for listed affordable accommodation provider Eureka is expected to intensify this week after builder and developer Ben Cottle upped his stake in the target to close to 13 per cent after raiding the register.

The listed developer is in the crosshairs of larger rival Aspen, which last Friday lodged its bidder statement laying out reasons for the two groups to combine and create a $500m sector specialist.

But it will likely have to sweeten its offer as recent trades, including Mr Cottle’s stake, and other market trades, have been struck at closer to 54c per share rather than the 46c per share value of Aspen’s scrip offer.

The trading activity could drag Aspen to the negotiating table with Eureka if it is keen to win a board recommendation for its bid. Eureka had said the proposed bid was too low and did not recognise the value of its operations.

Eureka’s largest shareholders Cooper Investors, with a 22.08 per cent stake, Tribeca Investment Partners, with 11.85 per cent, and boutique investment management firm 1851 Capital at just under 5 per cent, will also be significant in any takeover. Aspen has an interest of 13.64 per cent.

Mr Cottle is yet to show his hand but his rapidly built up stake shows both the desirability of the “living sector” and battle to get ahead in the area. He bumped up his interest from 9.62 per cent to 12.89 per cent and further trades were in train last Friday.

Aspen targets the 40 per cent of Australian households with income of less than $90,000 per annum who can afford to pay no more than $400 per week to rent or $400,000 to purchase for their housing.

Aspen’s portfolio has grown fourfold over the past five years to more than $500m and it expects the rapid growth to continue given the opportunities in the acutely under-supplied segment of the housing market.

Aspen said its bid was a 15.6 per cent lift on a non-binding and indicative move it made on Eureka in March last year. It has said its latest bid did not carry a merger premium on the basis that Eureka’s price had already jumped when it built up its stake.

In the bidder’s statement, Aspen chairman Clive Appleton said that investors would benefit from the better growth prospects that the larger company had compared to Eureka.

He cited Aspen’s fully integrated platform and broader business model and portfolio, which provides affordable accommodation to more household types, rather than a focus on retirees.

Mr Appleton said that a combined group would be more relevant on the ASX, particularly to large institutional investors which

could improve stock trading liquidity, stock price, and cost of capital.