DNZ property outlines merits of its Argosy plan

DNZ Property Fund Ltd today talked up its takeover plan for Argosy Property Trust, which it estimates will provide synergy benefits of $4 million to $5 million.

Under the plan DNZ Property would continue as the listed corporate entity, managing the combined portfolio.

Argosy said yesterday that its independent directors were evaluating the proposal after receiving an indicative and non-binding letter from DNZ Property. Earlier an oral approach had been described as uncompelling.

"We note that at this point the letter is indicative and non-binding, but envisages DNZ as the acquiring entity," Argosy independent directors said yesterday.

DNZ Property said today that it was still attempting to constructively engage with the independent directors of Argosy to provide them with further information to assist them with their evaluation of the proposal.

DNZ Property argues that its plan is better than an Argosy plan to internalise the management of its property portfolio.

Last month the Argosy Trust announced plans to internalise rights to manage the trust currently held by Argosy Property Management Ltd, which is owned by ANZ subsidiary OnePath. The move involves a payment of $32.5m to Argosy Property Management.

DNZ Property estimates cost savings of $3m to $3.5m per annum from using DNZ's management structure to reduce the costs of managing Argosy's portfolio. It also estimated $1m to $1.5m of savings per annum from costs associated with Argosy's current structure, including trust expenses, listing costs and audit fees.

The continuing synergies could increase shareholder value by $50m to $60m, it said.

The merged entity would be New Zealand's second largest property vehicle and would be strongly diversified by sector, region and tenant.

"DNZ believes this is a one-off opportunity to extract the maximum benefits from combining these businesses and it is critical that Argosy considers this proposal now, rather than defer it and proceed with its proposed internalisation," DNZ said.