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Cromwell (ASX:CMW) receives $520 million partial takeover offer

Cromwell (ASX: CMW) has gone into a trading halt as news broke of a partial takeover offer.

What is Cromwell?

Cromwell is a diversified real estate investor and manager with operations on three continents and a global investor base.

What’s going on?

The Australian Financial Review’s Street Talk broke the news this morning that Cromwell’s biggest shareholder called ARA wants to buy 29 Cromwell shares for every 100 owned shares at $0.90 per share.

ARA already owns a 24% stake in Cromwell and wants to increase its holding up to 49% if this $520 million proportional takeover offer is successful.

The $0.90 per share bid is at a 9.8% premium to the average share price over the past 30 days and a $0.03 premium to the last closing share price.

The AFR reported that ARA has supposedly already received approval to lift its stake from the Foreign Investment Review Board (FIRB).

ARA is reportedly “fed up” with Cromwell and its strategy, particularly the Polish property worth more than $1 billion on the balance sheet. ARA thinks this is a ticking time bomb.

What is Cromwell’s response?

Cromwell made an announcement this morning in response.

The property business said that shareholders are advised to “take no action”. Cromwell said the offer was unsolicited and opportunistic and is not an offer to acquire all the shares on issue. Cromwell will provide another announcement in due course when it has evaluated and assessed the terms of the offer.

ARA said it plans to drive board change. It also said that given Cromwell’s elevated gearing levels and the ongoing uncertainty about rental collections and asset values due to COVID-19, ARA is concerned that Cromwell will do a discounted capital raising.

Summary

If I were a Cromwell shareholder it would be hard to say what the right decision is. The offer price is almost 30% lower than the pre-COVID-19 price. But how long will it take Cromwell shares to naturally get back there? The old price is history. If there’s a clear opportunity somewhere else on the share market then it could be worth taking the money and investing it into that better opportunity.

Disclosure: At the time of writing, Jaz doesn’t own shares in any of the businesses mentioned. 

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