Australia's FKP may press Stockland to up Aevum bid

SYDNEY, Sept 9 (Reuters) - Australian retirement village operator Aevum Ltd AVE.AX is looking to work with larger rival FKP Property Group (FKP.AX) to fend off a $241 million hostile takeover bid from property firm Stockland (SGP.AX).

Aevum, which has rejected Stockland's bid as too low, is now considering a merger with a separately listed FKP business, the two firms said in separate statements on Thursday, implying a deal that could leave FKP with a blocking stake in Aevum.

FKP said in its statement that it had held early talks about a merger between Aevum and Forest Place Group (FPG.AX), which is 85 percent owned by FKP, but it gave no more details, saying the discussions were confidential.

In a separate statement, Aevum said only that it was in talks with parties, including FKP, to explore options in defending Stockland's A$1.50-a-share bid. [ID:nSGE671008]

Industry analysts said Aevum could use a deal with FKP to force a higher offer out of Stockland, an outcome that would also please FKP given that it would be likely to result in a revaluation of all Australian retirement-village businesses.

Retirement-village stocks have been historically trading at a deep discount to their net assets, but the A$30 billion sector has strong growth potential as a fifth of the country's population is projected to be aged over 65 in 20 years.

The sector is also ripe for consolidation because it is fragmented, with for-profit operators representing about 60 percent of the market.

Stockland's current bid values Aevum at less than its net tangible assets (NTA) of around A$2 per share, and the market is clearly expecting a higher offer. The stock has jumped from around A$1.10 before the bid to close on Thursday at A$1.79.

"I think it's win-win for FKP," said one analyst who declined to be named, saying that even if Stockland walked away from Aevum, the alternative merger plan would enable FKP to realise its goal to move Forest Place off its balance sheet.

"They benefit either way. If the tie-up goes through, what happens is FKP's interest in the Forest Place subsidiary will drop below 50 percent, and they can choose to no longer consolidate Forest Group on their balance sheet."

An Aevum-Forest Group merger may put pressure on Stockland to raise its offer because Stockland has a 16 percent stake in Aevum and would not want to see it diluted, analysts said.

The Australian Financial Review said on Thursday that FKP was considering an all-share merger of Aevum and Forest Place. The merger would be at NTA backing of A$2.66 for Forest Place and A$2.02 for Aevum.

Responding to the report, Aevum said, "The press reflects the indicative parameters of one potential transaction structure put to Aevum which is under consideration." (Editing by Mark Bendeich)