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Why the Primewest (ASX:PWG) share price is soaring 6% higher today

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The Primewest Group Ltd (ASX: PWG) share price is up by more than 6% in late afternoon trading.

This follows on the company releasing a takeover announcement for its wholly owned subsidiary, Vitalharvest Freehold Trust (ASX: VTH).

Today’s gains have seen the Primewest share price return to just a 4.2% loss year-to-date. Vitalharvest’s share price is up 28.0% so far in 2020.

By comparison the All Ordinaries Index (ASX: XAO) is down 1.3% since 2 January.

What do Primewest and Vitalharvest do?

Established in 1995, Primewest is an Australian property fund manager. The company has over $4.6 billion of assets under management across Australia and in the United States. Primewest manages retail, industrial, commercial, residential, and agricultural assets.

Vitalharvest owns one of the largest portfolios of berry and citrus farms in Australia. Its assets are located across New South Wales, South Australia and Tasmania and are leased to Costa Group (ASX:CGC).

What did Primewest announce to send its share price up 6% today?

After entering a trading halt yesterday, Primewest announced its support for the Macquarie Infrastructure and Real Assets (MIRA) proposal to acquire all of the issued shares of Vitalharvest for $1.00 per share, by way of a trust scheme.

Failing the approval of the trust scheme by shareholders, MIRA proposes to purchase Vitalharvest’s assets for a cash consideration of $300 million.

At least half of Vitalharvest shareholders that are not affiliated with Primewest need to vote in favour of the transaction. Primewest reported it will receive a fee of $8.0 million once the conditions are satisfied.

Commenting on the proposal, David Schwartz, managing director of Primewest, said:

Primewest’s intention is to support the proposed transaction. Upon acquiring the manager of VTH, Primewest sought to reduce the variability in earnings associated with the current VTH leases. However, there was no certainty that this strategy was achievable in a suitable timeframe whilst the MIRA Proposal provides cash certainty to all investors at a material premium to the price of VTH units. As such, in the absence of a superior proposal, Primewest intends to vote in favour of the MIRA Proposal.

Primewest continues to actively seek opportunities in the agricultural space and believes there is significant demand from investors to invest in the space.

With Vitalharvest shareholders not yet having voted on the proposed transaction, the Primewest share price will be one to watch.

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Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended COSTA GRP FPO. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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