The battle for manufactured homes group Gateway Lifestyle has taken another turn with Hometown America landing a new offer to topple last week's non-binding proposal from Brookfield. The new indicative price of $2.35 values Gateway Lifestyle at $714 ...
Commercial property finance
By Carolyn Cummins
25 June 2018 — 2:27pm
The battle for manufactured homes group Gateway Lifestyle has taken another turn with Hometown America landing a new offer to topple last week's non-binding proposal from Brookfield.
The new indicative price of $2.35 values Gateway Lifestyle at $714 million. The shares are trading on the ASX at $2.38, indicating the market is tipping Brookfield may return with a higher price.
Hometown America also revealed it now holds a relevant interest in Gateway Lifestyle securities of 18.2 per cent after buying out the largest shareholder, Perennial Value Management's 8.9 per cent stake at $2.30 per Gateway Lifestyle share.
Gateway Lifestyle retirement park in Stanhope Gardens, Sydney
Photo: Anthony Johnson/Fairfax MediaHometown America launched the offer process at $2.10 per Gateway Lifestyle securities on June 12, which was followed by Brookfield last week at $2.30, equal to $699 million.
Gateway Lifestyle has granted Brookfield an exclusive six-week period for due diligence and with the new offer, Hometown America will also conduct a non-exclusive due diligence process.
Included in the offer is an agreement from Brookfield that it cannot buy Gateway Lifestyle shares for 12 months other than as a result of a successful acquisition of Gateway.
Gateway Lifestyle construct manufactured home estates aimed at budget-conscious retirees in regional suburbs. The residents pay a ground rent for a pre-fabricated site in the estate.
Hometown America and Brookfield are attracted to the group for its exposure to affordable housing. Ingenia is the major competitor to Gateway Lifestyle in Australia.
But the softening residential sector has hit Gateway and the group issued an earnings downgrade in April.
Gateway Lifestyle chairman Andrew Love said the board remains committed to maximising value for security-holders and has started an assessment of the revised Hometown Proposal, including any implications for the exclusivity agreement with Brookfield.
''Gateway Lifestyle will keep the market informed of material developments,'' Mr Love said.
CLSA analysts said they had been expecting a higher price for Gateway Lifestyle shares, after calling the original Hometown America pitch ''opportunistic and fails to take into account overhead savings from being private and is less attractive once the second half of 2018 dividend is taken into account''.
"Ironically, Gateway Lifestyle listed to achieve a better cost of capital, but this has failed with a privatisation potentially a better outcome,'' CLSA's Sholto Maconochie said.
''We believe Hometown has a high likelihood of realising synergies should it acquire Gateway Lifestyle, especially from the management cost base. We identify at least $3 million of cost savings which in our view can be achieved relatively easily by Hometown, including savings on remuneration for key Gateway executives, board of directors fees and office lease expenses.''
Mr Maconochie said other sources of potential cost synergies include ASX listing fees and other duplication of employee expenses such as development staff, corporate overheads. He estimated savings of at least $5 million.
Carolyn Cummins is Commercial Property Editor for The Sydney Morning Herald.
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