Centro Properties has quickly become Australia’s biggest casualty of the global credit crunch. Like others around the world, it is paying the price for a debt-fuelled acquisition spree during an era of cheap financing.

After further big falls in recent days, the property trust’s market price is less than a 10th of its A$10bn ($8.9bn) peak last year. Opportunistic predators, smelling blood, are poring over its books in the hope of picking off its best assets.

Centro is racing against the clock. It has less than five weeks to refinance nearly A$4bn of debt and deliver a plan to win the continued support of its lead banks.

But shareholders should not be expecting a big rebound in the shares even if it manages to find a strategic partner to inject equity. Such a deal would probably dilute existing investors, who may also be asked to stump up fresh cash to pay down debt. In addition, Centro may also have to offload some of its best assets.

The company’s labyrinthine structure – more than 800 properties are either owned, partly owned or managed through two listed funds and scores of unlisted syndicates – will also complicate asset sales.

Centro’s woes have destabilised Australia’s listed property trust sector, with investors fearful others may report bad news. Analysts estimate A$20bn has been wiped off the market value of the country’s top 20 property companies in recent weeks, including market leaders such as Westfield. Investors are right to be taking a more critical look at Centro’s peers.


Siemens’ sound and fury

Sound and fury continue to engulf Siemens. A new bout of hysteria has erupted at the German industrial conglomerate over its annual shareholders’ meeting in two weeks’ time. Shareholders – led by the influential ISS, one of the world’s leading proxy advice providers – are threatening to vote against a motion of approval for former executives headed by Heinrich von Pierer and Klaus Kleinfeld, the past two chief executives.

This is understandable. An investigation into perhaps the largest corporate bribery scandal to hit Germany is ongoing, although both Mr von Pierer and Mr Kleinfeld deny any knowledge or wrongdoing. But it is also pretty pointless given that the vote carries no legal consequences – even more so as both men (and several others whom shareholders are voting against) have now left the company.

Far more significant is how a vote over the current members of both the supervisory and management boards goes. In this case, it is only the DSW, a small German shareholders’ association, that is threatening to vote against sitting members. It wants shareholders to vote against the reappointment of the supervisory board chairman, Gerhard Cromme, as well as that of two fellow directors – Josef Ackermann, the head of Deutsche Bank, and Lord Vallance, the former boss of BT. The three are the only board members seeking re-election at the AGM.

The DSW wants to enable Siemens to make a complete break with the past and rid itself of the last directors present when the scandal took place. All this noise, however, is an unwanted distraction from the most essential task for both the company and its shareholders: reforming it to make it more effective and ensure such a scandal cannot happen again.


Hasty Indian retreat

Two previously untipped Indian companies step in at the last minute to trump a richly priced recommended offer from a well-endowed multinational that already owns nearly 25 per cent of the target. Stranger things have happened. But not much stranger.

The unlikely counter-bidders – Adani and Welspun – duly withdrew their intention of outbidding Eni for the UK’s Burren Energy on Thursday, only hours after Darshan Desai of Euromax Capital, their London-based adviser, had described them as “very serious” about the deal.

It is significant, however, that these days it takes more than a nanosecond to dismiss the possibility of such a bid. Adani, an infrastructure company based in Gujarat, where Burren’s Indian oil activities are found, and Welspun, a supplier of pipes to the energy industry, are established Indian companies. Speculative investors have in the past hijacked the latter stages of recommended deals by buying disruptive stakes in British targets. Well-endowed emerging market predators are increasingly confident about intervening in bid battles that would have been alien territory as recently as a couple of years ago.

Adani/Welspun’s short-lived flirtation with the idea of a bid for Burren demonstrates that newcomers with an imperfect mastery of the British bid process risk looking foolish. But there are plenty of others like them ready to learn from such missteps


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