Stockland in Australand takeover?

Rumours yesterday that property group Stockland (ASX: SGP) might be making a move on Australand (ASX: ALZ) were countered with an announcement that the target’s majority Singapore-based owner was planning to hold on to its stake.

The possible move on Australand was reported online and in The Australian, but The Australian Financial Review said this morning that after concluding a review, Capitaland would keep its 59% stake in the $2 billion real estate developer and property manager. The apparent decision comes after reports in January that analysts were tipping Capitaland’s departure because after a restructure Australia was no longer seen as part of the company’s core market.

However, Capitaland’s review had been preceded last December by a move on Australand’s commercial and industrial assets by GPT Group (ASX: GPT), so the Singapore company’s decision to stick with Australand may be motivated more by the prospects of selling its stake for a higher price if Stockland is actually interested.

GPT pulled out of the prospective purchase on May 28. At that time Australand was trading at $3.50 and Stockland $3.75. At yesterday’s close they had reversed positions with Australand valued more at $3.61, up just one cent after being up three cents on Friday, and Stockland trading evenly at $3.49. Stockland is about four times the size, with a market capitalisation of just over $8 billion.

Capitaland was reported to have said there had been approaches (plural) for Australand, but none of them compelling, that the Australian company was providing a “stable stream of recurring income” and was well-placed to benefit from an improving real estate sector.

Australand’s half-year results are to be announced tomorrow. It will be interesting to hear if there is any news from Stockland. Australand hit a high of $3.77 in April but fell back to $3.20 when the GPT interest fell through.

Australand has a dividend yield of 6.0%. Stockland’s is 6.9%. The bigger company’s 52-week high is $3.98.

Stockland’s new chief executive officer Mark Steinert revealed a new strategy in May, involving more investment in industrial development and the possibility of tactical investments in office assets. It didn’t sound as a grand a plan as taking out a rival.

Foolish takeaway

A-REITs (ASX real estate investment trusts) are usually dividend yield investments, not speculative buys as prospective takeover targets, but Australand could yet prove to be both. And you’d expect Stockland to be strengthened by any acquisitions.

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Motley Fool contributor Andrew Ballard own shares in Stockland and Australand.

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