Babcock & Brown to exit satellite fund for A$66.8m

The sale of the management rights and its stake in Babcock & Brown Communities comes shortly after the specialist fund manager said it would review the ownership and management rights to its listed funds as part of a restructuring effort.

Specialist fund manager Babcock & Brown has agreed to sell management rights and its 12.5 percent stake in its listed satellite fund Babcock & Brown Communities to property developer Lend Lease Corporation in a transaction valued at A$66.8 million ($53.4 million; €37.4 million).

Babcock & Brown will receive A$17.5 million for the management rights to the contract and A$49.3 for its stake, payable in two equal tranches of A$.61 per share and A$.55 per share, respectively.

Additionally, Lend Lease will purchase 250 million new shares in Babcock & Brown Communities for A$170 million, which Babcock & Brown Communities will use in part to reduce its debt obligations.

The deal was the result of a strategic review of the fund, the recommendations of which included a price discovery process for the fund, debt reduction and the purchase of its management rights from Babcock & Brown.

Babcock & Brown announced in August strategic restructuring changes that included the review of the ownership and management of several of its listed funds in an effort to raise cash and re-focus on its core businesses of infrastructure, real estate and operating leasing.

Pending completion of the transaction, Lend Lease will own a 41 percent stake in the fund, replacing Babcock & Brown as manager and significant shareholder. Babcock & Brown Communities will change its name as part of the deal.

As part of the transaction, Lend Lease will sell seven retirement villages to Babcock & Brown Communities for a combination of redeemable convertible notes and cash totaling A$133.4 million.

A spokesman for Babcock & Brown Communities previously told PEO that the fund had received a stock offer for 40 percent of the fund from existing shareholder Prime Trust. Other bidders included Land Lease and Stockland and Prime Retirement & Aged Care Trust. 

For Lend Lease, this was not the only transaction in the retirement village space it had attempted this summer. In June, the company launched a hostile A$1.3 billion takeover offer for Australia's and New Zealand's retirement home operator FKP Property Group, which was ultimately rejected.

Babcock & Brown has seen its shares plummet more than 90 percent this year, while Babcock & Brown Communities’ shares are down about 50 percent.

Babcock & Brown Communities shares ended the day up 13.2 percent at A$.47 per share.