Green Property is to succeed with its hostile bid for publicly quoted British property company, Trafford Park Estates. With no counter-bid emerging, and the likelihood that Green would succeed, the directors of Trafford, have conceded defeat, and are now advising their shareholders to accept the offer. The directors, including the 81-yearold chairman, Sir Neil Westbrook, are to accept in respect of their own 5.5 per cent holding.
The recommendation by the Trafford board is seen as a victory for the Green board which refused to increase the offer, despite strong criticism from Trafford that it did not adequately reflect the value of the company. Green disagreed, and decided to play hardball a week ago, when it warned Trafford that its £133 million sterling (£156 million) offer was final, and that it would not be increased.
Trafford's property portfolio includes 300 acres of real estate surrounding Manchester United's Old Trafford soccer stadium.
Trafford has been forced to change the advise to its shareholders for two reasons.
First, it has been unable to find a "white knight" to take the place of Green. There was speculation over the weekend that Trafford was trying to put a deal together with a specific group but was finding it difficult to finalise.
Second, the final date for acceptances on Friday July 17th was looming. Any Trafford shareholder not accepting by that date would have forfeited the cash alternative, so there was pressure on the Trafford board to provide guidance to its shareholders. Trafford explained that there are "strong market indications that Green is likely to receive acceptances totalling more than 50 per cent". Just six institutional shareholders control 34 per cent of Trafford. While many were in favour of the Green approach, they were hoping for a higher offer.
Trafford has drawn attention to a number of other factors which were instrumental in changing its advice to shareholders:
The FTSE Property Index has fallen by 10.5 per cent since Green's offer was announced on May 19th.
While Trafford had pursued a number of options, including discussions with 10 Group Ltd, there is no immediate prospect of an alternative cash offer and it is unlikely that a firm proposal could be put to shareholders before the closure of the Green cash offer.
Trafford's share price might fall in the short-term despite the prospects mentioned in the defence document.
If the Green offer succeeds, shareholders who accept the offer after next Friday will receive Green shares. Green shares are trading at a 46 per cent premium to the reported asset value and "may be vulnerable to erosion of that premium". Trafford can make no comment of the underlying value of Green's assets "because Green has refused to supply a valuation of its portfolio. Furthermore, Green shares are primarily traded in Dublin and are subject to exchange rate fluctuations".
Green has welcomed the Trafford recommendation. "We are pleased that the board (Trafford) has seen the merits of the offer", Green's finance director, Mr Danny Kitchen told The Irish Times. The cash offer is 190p sterling per share. It has also offered 46 new Green shares for every 100 Trafford shares, valuing Trafford shares at about 203p sterling (239p). Trafford's shares have a net asset backing of 201p. As part of its opposition to Green, Trafford had offered a final dividend of 3.15p but this will now fall by the wayside.
