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Senator calls for FIRB review of 'opportunistic' offer for Cromwell
A federal Liberal senator is calling for regulators to review a foreign takeover offer for ASX-listed Cromwell Property Group, arguing the bid contravenes new rules brought in by Treasurer Josh Frydenberg to safeguard Australian assets during the coronavirus pandemic.
Queensland Senator Paul Scarr said he would raise his concerns about the offer from Singapore's ARA for the Brisbane-headquartered Cromwell with his colleagues in Parliament, as well as with the Foreign Investment Review Board (FIRB).
The Therapeutic Goods Administration building in Symondston, ACT is owned by Cromwell.
"It's opportunistic," Mr Scarr said. "I think the regulators need to consider it, I think FIRB needs to consider it. I was surprised they (ARA) had in principle agreement from FIRB."
"I applaud the actions the Treasurer took back in March in terms of decreasing the threshold for consideration down to zero, but it’s a question of making sure those actions are appropriately reflected in terms of individual transactions."
Mr Scarr said a key issue was that ARA had designed its bid as a proportional offer which would allow it to largely take control of Cromwell without adding in an appropriate premium, with the former company secretary of ASX-200 miner PanAust describing it as a "red flag".
ARA owns 23 per cent of Cromwell. It ramped up its bitter stoush with the Queensland company in June when it launched a proportional offer for 29 per cent of the Cromwell shares it didn't own. The offer could take ARA's stake in the group to near 49 per cent. It upped its bid in August to 92 cents a share from the 90 cents earlier offered. Cromwell's shares closed at 88¢ on Friday, but its net tangible assets are valued at 99¢ per share, and that excludes the value of its sprawling funds management business.
ARA says it has in principle approval from FIRB to increase its stake in Cromwell, which owns a slew of buildings leased to nationally sensitive tenants including the Department of Defence and the Therapeutic Goods Association.
A spokeswoman for Treasury which oversees FIRB said it did not comment on how it screened investments, but noted that the government had increased resources available to FIRB to monitor compliance with the zero-dollar regime.
"Where investors have been found to be acting in breach of Australia’s foreign investment rules the Government will take appropriate action, up to and including seeking a disposal order or illegally acquired assets and prohibit further investment under the foreign investment framework by investors that have sought to get around the rules," the spokeswoman said.
Cromwell will convene an extraordinary general meeting this Friday, where ARA is expected to succeed in getting two representatives – corporate raider Gary Weiss and investment specialist Joe Gersh – on the board due to support from Chinese-Singaporean billionaire Gordon Tang and family, who own a 16 per cent stake in the business.
Sources from both camps said proxy votes were filed by Mr Tang's interest last week. While his interests are expected to support ARA's resolution, the proxy votes indicate his interests are yet to accept ARA's offer.
Cromwell has argued ARA and the Tang family are acting in concert – an allegation that both shareholders strongly deny and the Takeovers Panel declined to review due to a lack of evidence.
The most recent substantial shareholder notice shows the Tangs acquired three per cent of Cromwell over six months to June 2020, including several on market acquisitions of millions of dollars worth of Cromwell's shares after FIRB's zero-dollar thresholds were brought in.
Cromwell chief executive Paul Weightman said the company had raised the Tang family's acquisition of its shares through normal compliance channels.
"Cromwell believes in the rule of law and that all foreign investors should comply with Australia's foreign investment laws and trusts that the Singapore-Chinese Tang Group obtained any required regulatory approval from FIRB before they purchased Cromwell securities."
The Tangs did not respond to inquiries. FIRB declined to comment on ARA or the Tang family's situation.
Asked whether he was concerned about the Tang's also increasing their stake in Cromwell and claims they are working with ARA, Mr Scarr said: "I’m not in a position to give any specific comment. There are a number of questions which have been raised by Cromwell and I think those concerns need to be addressed."
"This is an extremely successful Queensland company and the bidders should expect that people like myself are going to have considerable concerns this bid being launched in the middle of the pandemic."
A spokesman for ARA said it had all the required approvals for its offer.
"As Cromwell’s largest securityholder the ARA Group’s interests are aligned with all Cromwell securityholders and it is focused on ensuring sustainable value generation for all Cromwell securityholders over the long term.”