A merger to create a $3.5bn Bunnings landlord faces investor opposition

A takeover to create a $3.5bn owner of Bunnings stores could be under threat thanks to moves by an investor to install a new director at the target fund.

Euree Asset Management property director Winston Sammut. Picture: Britta Campion

The takeover play by the heavyweight BWP Trust for a smaller vehicle run by Newmark Capital to create a $3.5bn Bunnings landlord faces a fresh challenge, as a dissident investor prepares to call a meeting to install a new manager at the target fund.

Euree Asset Management, which has a near 3 per cent stake in the Newmark Property REIT, has received the share register and plans to call a meeting to replace Newmark and keep the trust listed on the sharemarket.

The BWP Trust, the country’s largest Bunnings landlord, last month made an almost $247m scrip bid for the Newmark fund, potentially ending a tough run for the smaller trust that also owns Bunnings properties.

The bid values the target trust at about $1.39 per share, which is below its updated book value of its assets at $1.68 per share, sparking concern about this gap, although much of the sector had traded at similar discounts as property has cooled.

Euree property director Winston Sammut has criticised the takeover deal, noting it involves a separate $22.5m payment by corporate giant Wesfarmers for the management of the Newmark trust, despite its poor performance since floating at $1.89 per share in late 2021.

The trust’s backers have noted the bid’s 43 per cent premium to the trading price and its support from major investors.

Euree wants to secure a new manager that would keep the trust going, rather than pursue the merger or even rapidly sell off the assets.

Mr Sammut said Newmark, controlled by businessman Simon T. Morris and former AFL star Chris Langford, had been “more intent” on selling the management rights than looking after investors’ interests.

Newmark Capital joint managing directors Chris Langford and Simon T. Morris.

“I’d like someone to explain to me why they are getting $22.5m,” he said, adding that Wesfarmers’ shareholders should also query the proposed payment.

Mr Sammut said the trust could instead be run for the longer term. “There are a number of managers I’ve spoken to who would be interested in taking it over,” he said.

He held out an olive branch ahead of calling the meeting in the hope that BWP’s offer is sweetened. “I am not looking to totally kybosh the deal, I just want it to be fair for everybody,” he said.

Mr Langford told investors in the Newmark trust at its results that its “solid performance” was in line with guidance and underpinned by the quality of the its portfolio.

“Given continued market uncertainty and the challenges facing the REIT sector, the BWP merger proposal is a highly attractive offer for NPR securityholders,” he said.

“The consideration reflects a material premium to NPR’s trading price and provides an opportunity to participate in a larger merged group with lower gearing,” he said.

Newmark has committed to accept its 18.3 per cent stake in the target trust, increasing the chances of the takeover going ahead.

NPR shares added 5c to $1.36 on Wednesday after a busy period of trading since last month.

Mr Langford said the manager was focused on unit holder returns. “We believe the proposal recognises the high quality and true value of the premium assets that make up the NPR portfolio, and having been to the market and explored sales and other transactions, this is clearly the best outcome for NPR investors,” he said.

BWP Trust manager Mark Scatena separately told investors the merger proposal was “in the best interests” of both sets of investors and provided an opportunity to combine complementary portfolios of quality assets with similar tenant profiles.