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A campaign from the board of Gold Coast-based seniors' rental accommodation provider Eureka Group (ASX: EGH) to prevent a scrip-based takeover from Aspen Group (ASX: APZ) has received a boost today after new substantial shareholder Filetron revealed its resistance to the deal.
Owned by Ben Cottle, founder of national property fitout company FDC, Filetron acquired a 9.62 per cent stake in Eureka earlier this month and has been steadily buying more shares since then to take its current shareholding to 19.29 per cent.
Late last week, and when Cottle's stake had already reached 15.97 per cent, Eureka hit out at what it deemed to be "misleading statements and material omissions" in Aspen's bidder statement for the company.
Aspen is offering 0.26 of its own shares for every Eureka share, which it has claimed values the target at $166 million based on an audited net asset value of $2.01 per APZ share.
However, APZ shares have not traded anywhere close to that in more than a year, and currently sit at $1.75 - a level that would value Eureka at $137.7 million if a deal were to take place today.
Eureka currently has a market capitalisation of close to $160 million, and the board has urged shareholders to reject the Aspen offer on the grounds it is "inadequate and materially undervalues Eureka".
The target has asserted that with Filetron against the takeover, it is unlikely to occur.
"The Board of Directors wishes to welcome Filetron as a new substantial shareholder and notes that Filetron plans to be a long-term investor and is looking forward to participating in the future growth of Eureka," the company wrote in a statement to the ASX.
"On the basis of the statement by Filetron, Aspen will not be able to achieve the 90 per cent threshold needed to compulsorily acquire all other Eureka shares not held by Aspen.
"Therefore, a number of the purported merger benefits outlined in the bidder’s statement will not be realised, including the estimated synergies, earnings accretion, and the combined balance sheet."
Eureka adds that scrip-for-scrip rollover relief is only available if Aspen becomes the owner of at least 80 per cent of shares, which is unlikely given Filetron's holdings of almost 20 per cent.
"This means that any Eureka shareholder who makes a capital gain on the disposal of their Eureka shares may crystalise a capital gains tax liability if they accept the offer and the offer becomes unconditional, despite not receiving any cash consideration under the offer," the company said to shareholders.
"The offer is at a discount to or represents no meaningful premium over Eureka’s share price at any time in the 12 months prior to the Offer being made and the Offer has also consistently represented a discount to the Eureka share price since it was made."
Eureka Group is described as the only pure-play ASX-listed provider of affordable seniors’ rental accommodation in Australia. It manages almost 2,900 units in 52 villages nationally, including the recent acquisition of six seniors’ rental villages in Western Australia for $44 million from Ingenia Communities Group (ASX: INA).
Aspen, which is headquartered in Sydney, has a portfolio of 5,000 dwellings across residential communities, retirement villages and holiday parks.
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