Knight Frank and Bayleys make bid to buy out Australian real estate giant

Australian real estate industry leader John McGrath and the board of ASX-listed McGrath Limited are backing a $95.5 million buyout offer from a consortium comprising global property behemoth Knight Frank and New Zealand’s largest full-service real estate group, Bayleys.

McGrath has entered into a scheme implementation deed through which the consortium would acquire 100 percent of McGrath’s share capital by way of a scheme of arrangement.The consortium has offered to buy McGrath at 60 cents per share, which is a 27.7 percent premium on the closing price of McGrath shares the day before the announcement. Shareholders can also elect to receive an unlisted scrip alternative or a combination of both instead.

McGrath founder and CEO, John McGrath intends to elect to receive the unlisted scrip alternative for his stake, which represents about 23.3 percent of McGrath stock on issue. The McGrath board, which holds or controls about 48.1 percent of issued stock, unanimously recommends that shareholders vote in favour of the scheme — unless there is a superior proposal — and subject to an independent expert concluding the deal is fair and in shareholders’ best interests.

Under the deal, Mr McGrath would continue in his role as CEO and managing director. Mr McGrath said he was looking forward to taking advantage of the opportunities available through his new international partners, with whom he said his agency shares “common values and cultures”. Mr McGrath said the network’s franchisees, agents and customers would benefit from the consortium’s global networks, expertise and access to high-net-worth clients.

The scheme is subject to conditions, including approval by McGrath shareholders at a scheme meeting, which will likely be held in June. If the scheme is implemented, McGrath will be delisted from the ASX. The McGrath board is entitled to declare and pay a dividend prior to the scheme’s implementation, in which case the scheme consideration would not be reduced by the cash amount of the dividend.

Knight Frank CEO of Australia, James Patterson, said: “The acquisition would allow Knight Frank to have a leading position in residential and commercial real estate in Australia, creating a full-service real estate capability to support and advise clients and customers.”

Mr Patterson said the three brands would continue to operate as they are now under the deal. Bayleys managing director, Mike Bayley, commented: “The ability to share ideas and innovations as well as systems and information will add considerable value to our clients across Australasia.”

McGrath was founded in 1988 and listed on the ASX in 2015. A scheme booklet will be prepared and lodged with the Australian Securities and Investments Commission for review in due course. Meantime, shareholders can review further details in an investor presentation lodged with the ASX.